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Explain the concepts of Opportunity Cost and Marginal Rate of Transformation using a production possibility schedule based on the assumption that no resource in equally efficientn prodduction of all goods.

Answer» <html><body><p></p>Solution :Suppose the only two goods produced are X and Y <br/> <img src="https://d10lpgp6xz60nq.cloudfront.net/physics_images/SG_MIC_ECO_C01_S01_034_S01.png" width="80%"/> <br/> Opportunity <a href="https://interviewquestions.tuteehub.com/tag/cost-25707" style="font-weight:bold;" target="_blank" title="Click to know more about COST">COST</a> refers to the <a href="https://interviewquestions.tuteehub.com/tag/quantity-1174212" style="font-weight:bold;" target="_blank" title="Click to know more about QUANTITY">QUANTITY</a> of one good foregone to obtain more quantity of the other good. For example when we move from combination A to B the economy foregoes 2 <a href="https://interviewquestions.tuteehub.com/tag/units-1438468" style="font-weight:bold;" target="_blank" title="Click to know more about UNITS">UNITS</a> of Y to obtain one more units of X, So, opportunity cost of obtaining 1X is 2Y. <br/> MRT means quantity of one good sacrified to produce an additional <a href="https://interviewquestions.tuteehub.com/tag/unit-1438166" style="font-weight:bold;" target="_blank" title="Click to know more about UNIT">UNIT</a> of the other good. For example, when we move from combination B to C the MRT is4Y : 1X. MRT increases as to produce more of good X, we need to transfer less and less efficient resources from good Y.</body></html>


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