Q1:- The nation has two alternative of producing 100X+200Y or 102X+196Y from its given resource .
The nation choose the second . What is the marginal opportunity cost of producing X.
(a) 4Y (b) 3Y (c) 2Y (d) 1Y
Q:-2 Marginal cost of a good includes .
(a) only variable cost
(b) both variable cost and fixed cost
(c) average variable cost
(d) None of these
1. When the nation chooses to produce the second alternative, it chooses to forgo 4 units of Y to produce 2 additional units of X. Thus, the marginal opportunity cost of producing an additional unit of X is 2 units of Y, or 2Y. The correct answer is option (c).
2. Total cost includes both fixed costs and marginal costs, out of which, fixed costs are constant at all levels of output. The change in total cost (or, marginal cost) is thus, due to variable costs only. The correct answer is option (a).