Question

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

Statement 1: Marginal Rate of Transformation measures the slope of Production Possibility Frontier. 

Statement 2: In case of Production Possibility Frontier, marginal opportunity cost is always decreasing.

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

Statement 1 is true and Statement 2 is false.

Explanation:

MRT measures the slope of the PPF. Marginal opportunity cost generally increases along the PPF, rather than decreases.