Skip to main contentSkip to solution

When some resources are shifted from Use 1 to Use 2 (given technology), the Marginal Rate of Transformation will

Solution

✅ Correct Option: 1

Option 1 -> As resources shift from Use 1 to Use 2, less suitable resources are progressively employed, increasing opportunity cost.

Option 2 -> Incorrect, as the law of increasing opportunity cost causes MRT to rise, not fall.

Option 3 -> Would only hold if resources were perfectly substitutable between uses, which is unrealistic.

Option 4 -> MRT cannot be zero when resources are being reallocated between alternative uses.


Hence, Option 1: increases -> The Marginal Rate of Transformation (MRT) measures the opportunity cost of producing one more unit of a good by sacrificing another. When resources are shifted from Use 1 to Use 2, the most suitable resources for Use 2 are transferred first. As more resources continue to shift, increasingly less suitable resources must be used, requiring greater sacrifice of Use 1 to produce additional units of Use 2. This reflects the law of increasing opportunity cost, causing the MRT to increase progressively. -> correct

Keyboard Shortcuts

  • Left arrow: Previous question
  • Right arrow: Next question
  • S key: Jump to solution
  • Q key: Jump to question