In an Imaginary Economy,consumers Buy Only Razors and Cologne

question 32

Multiple Choice

In an imaginary economy,consumers buy only razors and cologne.The fixed basket consists of 6 razors and 4 bottles of cologne.A razor cost $20 in 2009 and $25 in 2010.A bottle of cologne cost $30 in 2009 and $40 in 2010.Using 2009 as the base year,which of the following statements is correct?

• A)For the typical consumer,the number of dollars spent on razors is equal to the number of dollars spent on cologne in each of the two years.
• B)The consumer price index is 310 in 2010.
• C)The rate of inflation is 29.17% in 2010.
• D)None of the above is correct.

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Definitions:

Value-Added Cost

Costs that contribute to increasing the value of a product or service from the perspective of the customer, such as improvements in quality or features.

Theory of Constraints

A management philosophy focusing on identifying and managing the most significant limiting factor (constraint) that stands in the way of achieving a goal.

Bottlenecks

Points of congestion in a system where the actual or potential capacity is less than the demand, leading to delays or slowdowns.

Target Costing

A pricing strategy where the selling price of a product is determined first, and then the manufacturing cost is managed to ensure profitability.