Suppose the marginal cost of a piece of candy is given by MC_c = 2Q_c and the marginal cost of a desk is MC_d = 4 + 4Q_d.The current production levels are 20 pieces of candy and 4 desks.The marginal rate of transformation (MRT)is

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The MRT is the rate at which one good can be produced in exchange for a unit of another good, while keeping the level of total production constant. MRT = (MC_d)/(MC_c) MRT = (4+4(4))/(2(20)) MRT = 2 Since we are producing desks and candy, we have to divide the marginal cost of desks by the marginal cost of candy. Therefore, the MRT is 2. This means that to produce one additional desk, we need to give up the production of two units of candy. Since the MRT is positive, we are not operating at the production possibilities frontier and we could increase production of one or both goods. However, if we want to produce more desks, we have to give up candy.

Suppose the Marginal Cost of a Piece of Candy Is