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.
Related Questions
Trending Articles/News
