The Price Index Was 110 in the First Year, 100

question 6

Multiple Choice

The price index was 110 in the first year, 100 in the second year, and 96 in the third year. The economy experienced

• A)9.1 percent deflation between the first and second years, and 4 percent deflation between the second and third years.
• B)9.1 percent deflation between the first and second years, and 4.2 percent deflation between the second and third years.
• C)10 percent deflation between the first and second years, and 4 percent deflation between the second and third years.
• D)10 percent deflation between the first and second years, and 4.2 percent deflation between the second and third years.

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Definitions:

Differential Profit

The difference in profit from one business alternative compared to another, used to make decisions between various options.

Alternative Use

The potential for a resource or asset to be used in a different manner or for another purpose to generate value.

Differential Cost

The disparity in expenses resulting from choosing between two options or changes in the amount of output.

Manufacturing Operations

All processes involved in converting raw materials into finished goods, including assembly, labor, and use of machinery.