Exhibit 19-5

question 64

Multiple Choice

Exhibit 19-5.Firms A,B,and C operate in the market for computers.Each firm's product is popular in the market and distinct from what the other firms offer.The following table shows the prices of laptops from 2005 through 2007. Refer to Exhibit 19-5.Suppose this data was collected from a particular town,where people have a preference for firm C's laptops.If 2005 is used as the base year,which of the following statements will be true?

• A)The unweighted price index for 2007 understates the fall in the prices of laptops.
• B)The unweighted price index for 2006 overstates the fall in the prices of laptops.
• C)The unweighted price index should only use the data for laptops produced by firms A and B to provide an accurate picture of the change in prices.
• D)The unweighted price index will better reflect the change in prices over these years than a weighted price index.

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Definitions:

Plasma Screen

A type of display technology used in televisions and computer monitors, known for its bright, clear images and wide viewing angles.

Higher Education

This term refers to education beyond high school level, usually provided by universities and colleges, leading to degrees or certificates.

Equilibrium Prices

A price point where the demand for a particular item matches its supply, ensuring market equilibrium.

Price Inelastic

A characteristic of goods for which demand does not significantly change with a change in price, indicating consumers' necessity or lack of substitutes for the product.