Q.(a) Explain the properties of iso-quants with the help of a diagram.

(a) An iso-quant shows input combinations giving the same output; it is downward-sloping, convex to the origin (diminishing MRTS), never intersects another iso-quant, lies higher for higher output, and never touches the axes. (b) SEZs are duty-free enclaves that aim to boost exports, investment, FDI, employment and infrastructure, offering tax concessions and single-window clearance.

(a) Properties of Iso-quants (described in words in place of the diagram)

An iso-quant (also called an equal-product curve or production-indifference curve) is a curve showing all the different combinations of two inputs (say labour and capital) that yield the same level of output. Imagine the quantity of labour measured on the horizontal axis and capital on the vertical axis; an iso-quant is a smooth curve sloping down from upper-left to lower-right, and a whole family of such curves (an iso-quant map) can be drawn, each farther from the origin representing a higher output. Its properties are:

1. Iso-quants slope downward (negative slope). To keep output constant, if the firm uses more of one input it must use less of the other; hence the curve slopes from left to right downward.
2. Iso-quants are convex to the origin. This is because of the diminishing Marginal Rate of Technical Substitution (MRTS) — as more labour is substituted for capital, each additional unit of labour replaces less and less capital, so the curve bows in toward the origin.
3. A higher iso-quant represents a larger output. An iso-quant lying farther to the right (away from the origin) uses more of both inputs and so yields a higher level of output.
4. Two iso-quants never intersect (or are tangent). Each iso-quant stands for one output level; if two crossed, the point of intersection would represent two different outputs at once, which is impossible.
5. Iso-quants do not touch either axis. Production of a positive output normally needs some of both inputs, so the curve never meets the labour axis or the capital axis.

(b) Objectives and Characteristics of Special Economic Zones (SEZ)

A Special Economic Zone (SEZ) is a specially demarcated, duty-free enclave that is treated as foreign territory for the purposes of trade, duties and tariffs, set up to boost exports and investment.

Objectives of SEZs:

1. Promotion of exports of goods and services and earning of foreign exchange.
2. Attracting investment, including foreign direct investment (FDI), from within and outside the country. …