Tofu Becomes More Expensive in 2008 at Safeway/Vons in Laguna

question 165

Multiple Choice

Tofu becomes more expensive in 2008 at Safeway/Vons in Laguna Nigel,California.This means

• A) the consumer price index (CPI)will rise in 2008 if,and only if,Laguna Nigel is one of the considered 38 geographic locations and tofu is one of the 8,000 goods included in the CPI.
• B) the consumer price index (CPI)will almost certainly rise in 2008,even if Laguna Nigel is not included in the index,as long as tofu is included and becomes more expensive on average at the other locations.
• C) the consumer price index (CPI)will likely fall (in 2008)if the average weighted price of tofu increases in the United States and the price of tofu at Safeway/Vons makes almost no difference in the CPI.
• D) the consumer price index (CPI)might rise or fall (in 2008)and the price of tofu at Safeway/Vons could make a very small difference in the CPI if tofu at Safeway/Vons is included in the index.But because tofu is a relatively large portion of the entire CPI,it is most likely the CPI will rise.
• E) tofu,even if included in the consumer price index (CPI)in 2008,would make a small difference on the average weighted price of food and beverages.Food and beverages only constitute a small portion of the CPI,and hence,this would be unlikely to affect the overall CPI by any significant amount.

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Definitions:

Fixed Expenses

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums, providing stability in financial planning.

Break-Even Point

The production level or sales volume at which total revenues equal total expenses, with no net profit or loss.

Variable Expenses

Expenses that fluctuate in direct proportion to the amount of production or the volume of sales, including items like direct labor and raw materials.

Contribution Margin

The amount by which the sale of a product exceeds its variable costs, contributing to covering fixed costs and generating profit.