Question

In the following Question, read the following statements and choose the correct alternative:

Statement 1: Marginal rate of transformation increases because it is assumed that all resources are equally efficient in production of all goods. 

Statement 2: There exists a direct relationship between change in quantity of one commodity and change in quantity of the other commodity in case of Production Possibility Frontier.

Options

• Both the Statements are true.

• Both the Statements are false.

• Statement 1 is true and Statement 2 is false.

• Statement 2 is true and Statement 1 is false.

Answer 1

Both the Statements are false.

Explanation:

MRT increases because resources are not equally efficient in producing all goods. The PPF shows an inverse relationship: producing more of one good requires producing less of the other.