Why do trade-offs occur? How are budget constraints related to trade-offs?
What will be an ideal response?
Trade-offs occur because of scarcity: economic agents need to satisfy their wants with limited resources. Therefore, in most cases, some benefits have to be given up in order to gain some other benefits. Budget constraints quantify the relevant trade-offs that an economic agent faces. Once trade-offs are quantified, rational decision making becomes easier allowing the individual to make an optimal decision.
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Refer to the figure below. If the price of soda is $1.25 per can, then the quantity of soda demanded in the market each week is: 
A. 40 B. 10 C. 30 D. 0
Any point on the lowest indifference curve is preferable to a point on a higher indifference curve.
Answer the following statement true (T) or false (F)
If Japan is twice as good at producing cameras and three times as good at producing TV sets as the United States, Japan is said to have a comparative advantage in TV sets and the United States has a comparative advantage in cameras
a. True b. False Indicate whether the statement is true or false
If the marginal cost of producing a television is constant at $200, then a firm should produce this item
A) only if the marginal benefit it receives is greater than $200 plus an acceptable profit margin. B) as long as the marginal benefit it receives is just equal to or greater than $200. C) as long as its marginal cost does not rise. D) until the marginal benefit it receives reaches zero.