Multiple Choice
Suppose Paulie can produce either 4 cups of ice cream or 8 cups of lemonade in one hour. What is Paulie's opportunity cost of producing one cup of ice cream?
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0. Basic Principles of Economics
Scarcity and Choice
Struggling with Microeconomics?
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Which statement best describes the relationship between decisions and trade-offs in the context of scarcity?
A
Every decision involves trade-offs because choosing one option means giving up others due to limited resources.
B
Trade-offs only occur when resources are unlimited, so decisions are unaffected by scarcity.
C
Decisions and trade-offs are unrelated concepts in economics.
D
Trade-offs are only relevant for businesses, not for individual decision-making.
Verified step by step guidance1
Understand the concept of scarcity: Scarcity means that resources are limited and cannot satisfy all wants and needs simultaneously.
Recognize that because resources are scarce, individuals and businesses must make choices about how to allocate these limited resources.
Define trade-offs: A trade-off occurs when choosing one option requires giving up another option because resources are limited.
Connect decisions and trade-offs: Every decision involves trade-offs since selecting one alternative means forgoing others due to scarcity.
Conclude that the best description is that every decision involves trade-offs because choosing one option means giving up others due to limited resources.
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