Problems with a Fixed-Weight Price Index Include All of the Following

question 93

Multiple Choice

Problems with a fixed-weight price index include all of the following except one.Which is the exception?

• A)the index utilizes prices from the base year only
• B)the index does not account for relative price changes over time
• C)price distortions only decrease when there is a long time period covered
• D)base year does not include new products which came into existence later
• E)the price index does not take into consideration quality changes

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Definitions:

Purely Competitive Firm

A business that operates in a market with many buyers and sellers, where each firm has no control over the market price and produces a homogeneous product.

Maximize Profit

The economic goal of efficiently allocating resources in production to achieve the highest possible return or profit.

Start-up Firms

New business ventures that are in the early stages of operation, often characterized by innovative products or services and high growth potential.

United States

A country located in North America, comprised of 50 states, a federal district, five major self-governing territories, and various possessions.