Question

Sophia is planning her activities for a hot summer day. She would like to go to the local swimming pool and see the latest blockbuster movie, but because she can only get tickets to the movie for the same time that the pool is open she can only choose one activity. This illustrates the basic principle that…

a) people face tradeoffs.
b) rational people think at the margin.
c) people respond to incentives.
d) improvements in efficiency sometimes come at expense of equality.

Answer 1

Answer: A) People face tradeoffs

Explanation: Since Sophia can get tickets for a movie that is at the same time as the pool is open, she faces objective circumstances, which is why she will have to choose one of two options. This means that she will have to compromise between two equally desired activities that are incompatible, since she can not affect the objective circumstances, due to which she has to choose one of two activities.This compromise is tradeoffs.

In other words, tradeoffs can be described as a giving up of one thing or activity in exchange for the other one we want equally as the first.