When output of Good-1 increases from 100 units to 110 units and output of Good-2 decreases from 400 units to 350 units,

Question

Write ‘true’ or ‘false’ with a reason:

When output of Good-1 increases from 100 units to 110 units and output of Good-2 decreases from 400 units to 350 units, marginal opportunity cost = 50 units.

Answer 1

False. 

Marginal opportunity cost = 5 units. Because, 

Marginal opportunity cost = Loss of output of Good - 2/Gain of output of Good - 1

when some resources are shifted from Good-2 to Good-1.