Consider the Following Information About the Price and the Price

question 68

Multiple Choice

Consider the following information about the price and the price index of a popular book over three years. If the price index in 2011 was 95 instead of 111.11, it would imply that ________.

• A) the price of the book in 2011 was 16.11% lower than its price in 2009
• B) 2011 would be considered as the base year
• C) the price of the book in 2011 was 5% lower than its price in 2009
• D) the price of the book in 2011 would be $4

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Definitions:

Comparative Advantage

An economic theory that explains how and why it benefits countries to specialize in producing goods in which they have a lower opportunity cost and to trade with others.

Constant Returns to Scale

A situation in production where increasing all inputs by a certain factor results in output increasing by the same factor.

Competitive Equilibrium

A market state where supply equals demand, resulting in an efficient distribution of goods and services without excess.

Price Ceiling

A government-imposed limit on the price charged for a product, intended to protect consumers from high prices.