Which of the following is a trade-off faced by a family deciding whether to buy a new car?

• A. Spending money on a new car means less money available for vacations or savings.
• B. The price of gasoline increases due to global oil market fluctuations.
• C. The government sets a new tax rate for automobile purchases.
• D. Car manufacturers introduce new models with advanced technology.

Answer: (A)

Verified step by step guidance

1. Understand the concept of a trade-off in microeconomics: it refers to the idea that choosing more of one thing usually means having less of another due to limited resources.
2. Identify the decision the family is making: whether to buy a new car or not, which involves allocating their limited budget.
3. Recognize that spending money on a new car reduces the amount of money available for other uses, such as vacations or savings, illustrating a direct trade-off.
4. Distinguish this from external factors like changes in gasoline prices, government tax rates, or new car models, which are not trade-offs but rather external influences or market changes.
5. Conclude that the trade-off is the opportunity cost of buying the car, which is the value of the next best alternatives forgone, such as vacations or savings.