After Adjusting for Inflation, a Comparison of the Price of Leg

question 210

Multiple Choice

After adjusting for inflation, a comparison of the price of leg warmers reveals that the price of leg warmers was significantly higher in the 1980s than it is today. Which of the following can explain this?

• A) Since the 1980s jeans have become preferable to leg warmers, decreasing the demand for leg warmers.
• B) New regulation on the importing of leg warmers made abroad decreased the supply of leg warmers to the United States.
• C) An increase in the price of cotton used to make leg warmers has led to a decrease in the price of leg warmers today.
• D) The expected increase in the price of yarn has led to a decrease in the price of leg warmers today.

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Definitions:

United States

A country in North America consisting of 50 states and a federal district, known for its diverse geography, culture, and economy.

Marginal Revenue Product (MRP)

The change in a firm’s total revenue when it employs 1 additional unit of a resource (the quantity of all other resources employed remaining constant); equal to the change in total revenue divided by the change in the quantity of the resource employed.

Total Revenue

The total amount of money received by a company from the sale of goods or services before any expenses are deducted.

Real Wages

The purchasing power of wages, adjusted for inflation, indicating the quantity of goods and services that can be bought.