Table 5-3. Prices and Quantities

question 159

Multiple Choice

Table 5-3.
Prices and Quantities

-Refer to Table 5-3. Using the GDP deflator to measure the average level of prices and using 2006 as the base year, what is the economy's inflation rate?

• A)20 percent for 2009 and 12.5 percent for 2010
• B)20 percent for 2009 and 30 percent for 2010
• C)25 percent for 2009 and 28 percent for 2010
• D)44.7 percent for 2009 and 45.5 for 2010

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Definitions:

Mark-Up Percentage

Mark-up percentage is the ratio between the cost of a good or service and its selling price, expressed as a percentage over the cost, indicating the profit margin.

Return On Investment

A measure used to evaluate the efficiency or profitability of an investment compared to its initial cost.

Cost-Plus Pricing

A pricing approach that involves adding a consistent percentage or fixed sum to the production cost of a product or service to set its sale price.

Absorption Cost

A costing method that includes all manufacturing costs - direct materials, direct labor, and both variable and fixed manufacturing overhead - in the cost of a product.