The Technique Used to Calculate the CPI Implicitly Assumes That

question 70

Multiple Choice

The technique used to calculate the CPI implicitly assumes that consumers buy

• A)relatively more of goods with relative prices that are increasing.
• B)relatively less of goods with relative prices that are decreasing.
• C)the same relative quantities of goods as in a base year.
• D)goods and services whose quality improves at the rate of growth of real GDP.
• E)more computers and CD players and fewer black-and-white TVs.

---

Definitions:

Explicit Costs

Costs that involve direct monetary payment by a firm for the resources needed in production, such as wages and materials.

Implicit Costs

The opportunity costs of utilizing resources owned by the company for its operations instead of other purposes.

Accounting Profit

The financial gain calculated by subtracting total explicit costs from total revenues, excluding the consideration of implicit costs or opportunity costs.

Economic Profit

The gap between a company's total earnings and its combined explicit and implicit expenses.