Under Which of the Following Conditions Will There Be No

question 13

Multiple Choice

Under which of the following conditions will there be no substitution bias in the CPI?

• A) Lower-priced goods increase in price by a greater percentage than do higher-priced goods.
• B) Higher-price goods increase in price by a greater percentage than do lower-priced goods.
• C) All goods change in price by the same amount.
• D) All goods change in price by the same percentage.

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Definitions:

Collusion

An agreement, usually secretive, between two or more parties to limit competition, set prices, or manipulate market conditions.

Cartel Members

Firms or entities that agree to control prices and production to monopolize a market or restrict competition.

Incentive To Cheat

The motivation or tendency to deceive or engage in dishonest practices for personal gain, often seen in competitive situations.

Kinked-Demand Curve

A demand curve that has a flatter slope above the current price than below the current price. Applies to a noncollusive oligopoly firm if its rivals will match any price decrease but ignore any price increase.