Question

A. Juanita is training for a triathlon, a timed race that combines swimming, biking, and running. Consider the following sentence: Juanita has only 20 hours this week that she can devote to training. Each hour she spends swimming is an hour that she can't spend biking or run. Which basic principle of individual choice do these statements best illustrate?

1. Juanita can use time most efficiently by spending the same amounts of time on swimming, biking, and running.
2. People face trade-offs
3. People usually exploit opportunities to make themselves better off.
4. Juanita has an incentive to spend more time on swimming than on biking or running.

B. The interaction of individual choices

Immediately after an ice storm brought down power lines throughout the region, hardware stores were sold out of batteries and flashlights. However, within a couple of days, special deliveries brought in extra batteries and flashlights, and everyone who wanted to buy a flashlight or batteries was able to do so. Which of the following principles of economic interaction best describes this scenario?

1. Markets allocate goods effectively.
2. When markets do not achieve efficiency, government intervention can improve overall welfare.
3. All costs are opportunity costs.
4. There are gains from trade.