Mitch has $100 to spend and wants to buy either a new amplifier for his guitar or a new mp3 player to listen to music while working out. Both the amplifier and the mp3 player cost $100, so he can only buy one. This illustrates the basic concept that
a. trade can make everyone better off.
b. people face trade-offs
c. rational people think at the margin.
d. people respond to incentives.
Answer: b