Question

It is better to evaluate economic decisions at the marginal, where the decision has to be made as long as its marginal benefit exceeds its marginal cost, if not equal to its marginal cost.

T or F

If a country produces only two products, then by looking at the country's production possibilities curve (PPC), one can see that the opportunity cost of producing one of the products is the same as (equal to) the marginal cost of producing that product.

T or F

Answer 1

1) TRUE . We can say that optimum is reached when marginal benefit = marginal cost of an economic activity . So we take decisions as long as MB > MC until they reach a point where they are equal . If the MB < MC of suppose producing a good , then employing more inputs would be fruitless , so the activity needs to be stopped immediately .

2) TRUE . Opportunity cost of producing one of the product is counted in terms of another product . So here in a PPC we see that the amount of good 1 received by forgoing 1 unit of good 2 is marginal benefit and similarly amount of good 2 forgone to produce 1 extra unit of good 1 is the marginal cost of production . So the opportunity cost is equal to the marginal cost .