CUET Preparation Today
In the question given below there are 2 statements marked as Assertion (A) and Reason (R). Choose the correct alternative from the following options. Assertion (A)- Production possibility curve is a concave shaped curve. Reason (R)- Diminishing marginal rate of substitution cause the shape of the curve to be concave. |
Both (A) and (R) are true and (R) is the correct explanation. Both (A) and (R) are true but (R) is not the correct explanation of (A). (A) Is true but (R) is false. (A) Is false but (R) is true. |
(A) Is true but (R) is false. |
The correct answer is Option 3: (A) Is true but (R) is false. Assertion (A)- Production possibility curve is a concave shaped curve. This is correct. Production possibility curve gives all the maximum possible combinations of 2 goods that can be produced with the available resources and technology in the economy. The shape of PPC is concave in nature. This curvature reflects increasing opportunity cost as production of one good increases. Reason (R)- Diminishing marginal rate of substitution cause the shape of the curve to be concave. It is false because the diminishing marginal rate of substitution (MRS) refers to the concept in indifference curves (consumer theory), not PPC. Instead, the PPC is concave due to the law of increasing opportunity cost [increasing Marginal Rate of Transformation (MRT)] which states that as we produce more of one good, we must give up increasingly larger amounts of the other good. |
