“PPC is concave to the origin”. Which of the following options explain the reason behind the same?
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Marginal opportunity cost tends to rise Marginal rate of transformation decreases Marginal rate of transformation rises Both 1 and 3 |
Both 1 and 3 |
The marginal rate of transformation (MRT) refers to the number of units of good Y that will be foregone to produce an extra unit of good X while keeping the factors of production and technology constant. Due to increasing marginal rate of transformation the PPC becomes concave to the origin. Marginal rate of transformation is also known as marginal opportunity cost. Thus, last option stands to be correct. |