Following Is Data for a Hypothetical Economy

question 185

Multiple Choice

Following is data for a hypothetical economy.The base year is 2002 (Price index = 100) . Refer to the above data.From 2003 to 2006, prices rose by:

• A)3 percent.
• B)7 percent.
• C)9 percent.
• D)10.7 percent.

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Definitions:

Natural Monopoly

A market situation where a single firm can supply a product or service at a lower cost than any potential competitor, often due to economies of scale.

Substitutes

Alternative goods or services that can satisfy the same needs as another, often leading to a choice between the two based on price, convenience, or preference.

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect knowledge, where no single firm can influence the market price.

Profit-Maximizing

The method through which a company identifies the pricing and production quantity that maximizes its profits.