On October 25, 1978 the Washington Post Presented a Graphic

question 11

Multiple Choice

On October 25, 1978 the Washington Post presented a graphic showing the declining purchasing power of the U.S. dollar. What was worth $1 in 1958 was worth only $0.44 in 1978. They illustrated the decline in value by showing a dollar that was 3 inches by 1 inch in 1959, and one that was 1.32 inches (44% of 3 inches) by .44 inches in 1978. What is wrong with this kind of a display?

• A) You can't equate dollars in 1958 with dollars in 1978.
• B) The dollar actually increased in purchasing power over that period of time.
• C) There is nothing wrong with doing this.
• D) The area of the dollar is reduced by more than .44%.

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Definitions:

Economies of Scale

Describes the cost benefits that companies achieve through their operation size, where the cost for each unit produced typically falls as the scale of operation grows.

Constant Marginal Cost

A situation in which the cost of producing one additional unit of a product remains the same, regardless of the volume produced.

Average Fixed Cost

The cost that a company incurs for fixed resources divided by the quantity of output produced.

Diminishing Marginal Returns

A principle in economics where each additional unit of input results in a smaller increase in output after a certain point.