Question
Read the following information carefully which records production possibilities for two goods X and Y for a hypothetical economy and answer the questions 1-6 on the basis of the same:
CombinationGood-X (Units)Good-Y (Units)
A030
B128
C224
D318
E410
F50
1. On the basis of the data given above, the marginal opportunity cost between points B and C will be _________.
(a) 2
(b) 4
(c) 6
(d) 8

2. On the basis of the data given above, calculate the marginal opportunity cost between points E and F.
(a) 2
(b) 2.5
(c) 5
(d) 10

3. Identify the shape of PPC for the above data.
(a) Downward sloping concave PPC
(b) Downward sloping convex PPC
(c) Downward sloping straight line PPC
(d) None of these

4. Identify the correct formula to calculate Marginal Opportunity Cost.
(a) $\frac{\Delta Y \text { (gain of output) }}{\Delta X \text { (loss of output) }}$
(b) $\frac{\Delta Y \text { (loss of output) }}{\Delta X \text { (gain of output) }}$
(c) $\frac{\Delta X \text { (gain of output) }}{\Delta Y (\text { loss of output })}$
(d) None of these

5. Read the following statements carefully and choose the correct alternative among those given below:
Statement 1: Marginal opportunity cost refers to value of a factor in its next best (or second best) alternative use.
Statement 2: Technological advancement shifts the PPC to the right.
Alternatives:
(a) Both the statements are true
(b) Both the statements are false
(c) Statement 1 is true and Statement 2 is false
(d) Statement 2 is true and Statement 1 is false

6. If marginal rate of transformation is constant, PPC will be _________.
(a) downward sloping concave
(b) downward sloping convex
(c) downward sloping straight line
(d) none of these

Answer

1. (b) 2. (d) 3. (a) 4. (b) 5. (d) 6. (c)

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