In the context of scarcity and choice, a trade-off between responsiveness and costs is referred to as which type of trade-off?

• A. Efficiency trade-off
• B. Equity trade-off
• C. Opportunity cost trade-off
• D. Flexibility trade-off

Answer: (D)

Verified step by step guidance

1. Understand the concept of scarcity and choice: Scarcity means limited resources, so individuals and firms must make choices about how to allocate these resources.
2. Recognize that a trade-off involves giving up one thing to gain another, often balancing competing objectives.
3. Identify the specific trade-off described: balancing responsiveness (how quickly and effectively a firm or individual can react to changes) against costs (the expenses incurred).
4. Recall the definitions of common trade-offs in microeconomics: Efficiency trade-off relates to output and resource use, Equity trade-off concerns fairness, Opportunity cost trade-off involves the value of the next best alternative forgone.
5. Conclude that the trade-off between responsiveness and costs is known as a Flexibility trade-off, because it involves balancing the ability to adapt quickly with the associated costs.