Suppose That Inflation Is 3% Per Year

question 53

Multiple Choice

Suppose that inflation is 3% per year. This means the cost of an item increases by 3% each year. Suppose a jacket cost $150 in 2011. Find a formula that gives the cost of the jacket C in dollars after t years.

• A)C = $150 + 1.03^t
• B)C = $150 × 1.03^t
• C)C = $150 × 1.3^t
• D)C = $150 + 1.3^t

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Definitions:

Monopolistic

Describing a market structure where there is only one or a few sellers, each offering a unique product.

Industry Structure

The organization of and relationships between companies within a particular sector, characterized by aspects such as competition, product differentiation, and market size.

Oligopoly

A market structure characterized by a small number of firms whose decisions about pricing and output affect each other.

Market Price

The price at which a good or service is currently traded in the market, determined by supply and demand.