Chip's Chocolate Factory Has an Agreement with Its Workers to Completely

question 139

Multiple Choice

Chip's Chocolate Factory has an agreement with its workers to completely index the wages of its employees to inflation in the CPI. Chip's currently pays its production line workers $20 an hour and is scheduled to index their wages today. If the CPI is currently about 120 and was 100 a year ago, by how much should Chip's increase the hourly wages of its workers?

• A) $0.58
• B) $0.65
• C) $1.00
• D) $4.00

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Definitions:

Competitor

An entity operating in the same industry or market as another, offering similar products or services.

Profit Maximizing

This is the process or strategy businesses employ to achieve the highest possible profit, where marginal revenues equal marginal costs.

Monopolistic Competition

A market structure characterized by many firms selling products that are substitutes but not perfect substitutes, leading to some degree of market power for each firm.

Cournot Duopoly

A market situation where two firms compete with one another by deciding on output quantity with the assumption that the other's decision remains constant.