Suppose the Typical Consumer Buys More Bananas Than Oranges

question 114

Multiple Choice

Suppose the typical consumer buys more bananas than oranges.In fixing the basket of goods and services for the purpose of calculating the consumer price index,the Bureau of Labor Statistics

• A)ignores the fact that the typical consumer buys more bananas than orange;this procedure does not affect the value of the index.
• B)ignores the fact that the typical consumer buys more bananas than orange;this procedure results in a potentially-serious bias in the index.
• C)places more weight on the price of bananas than on the price of oranges;the weights of the two prices are determined by surveying consumers.
• D)places more weight on the price of bananas than on the price of oranges;the weights of the two prices are determined by the extent to which those prices have changed over the previous year.

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Definitions:

Common Fixed Expenses

Overhead costs that do not vary with production volume and are shared across different departments or products.

Break-Even

The point at which total revenues equal total costs, resulting in no profit or loss for the business.

Sales Dollars

A measurement of revenue generated from the sale of goods or services, expressed in monetary units.

Net Operating Income

The total profit of a company after operating expenses are deducted from operating revenues, but before interest and taxes are deducted.