Question : Statement 1: The marginal rate of transformation (MRT) measures the rate at which one good can be exchanged for another along the PPC.
Statement 2: The MRT is constant along the entire PPC.
Option 1: Statement 1 is true, and statement 2 is false.
Option 2: Statement 1 is false, and statement 2 is true.
Option 3: Both statements 1 and 2 are true.
Option 4: Both statements 1 and 2 are false.
Correct Answer: Both statements 1 and 2 are true.
Solution : The correct answer is (c) Both statements 1 and 2 are true.
Statement 1 is true: The marginal rate of transformation (MRT) measures the rate at which one good can be exchanged for another along the production possibilities curve (PPC). It represents the opportunity cost of producing an additional unit of one good in terms of the other good that must be given up.
Statement 2 is also true: The MRT is constant along the entire PPC under the assumption of constant opportunity costs. This means that the trade-off between the two goods remains the same regardless of the quantity of each good being produced.
Therefore, both statements 1 and 2 are true.
Question : Statement 1: The marginal rate of transformation (MRT) indicates the opportunity cost of producing one more unit of a good in terms of the other good.
Statement 2: The MRT is constant along the PPC, assuming a linear production possibilities curve.
Question : Statement 1: Consumer equilibrium can occur when the marginal rate of substitution is equal to the relative price of goods.
Statement 2: The marginal rate of substitution measures the rate at which a consumer is willing to substitute one good for another while maintaining the same level of satisfaction.
Option 3: Both statement 1 and statement 2 are true.
Option 4: Both statement 1 and statement 2 are false.
Question : Statement 1: The production possibilities curve (PPC) represents the maximum combination of goods that can be produced in an economy. Statement 2: Points inside the PPC represent efficient resource allocation.
Question : Statement 1: Cross elasticity of demand measures the responsiveness of quantity demanded of one good to changes in the price of another good.
Statement 2: Positive cross elasticity of demand indicates that two goods are substitutes.
Option 1: Both statements are true.
Option 2: Both statements are false.
Option 3: Statement 1 is true, and statement 2 is false.
Option 4: Statement 1 is false, and statement 2 is true.
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