When the Quality of a Good Improves While Its Price

question 21

Multiple Choice

When the quality of a good improves while its price remains the same, the purchasing power of the dollar

• A)increases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
• B)increases, so the CPI understates the change in the cost of living if the quality change is not accounted for.
• C)decreases, so the CPI overstates the change in the cost of living if the quality change is not accounted for.
• D)decreases, so the CPI understates the change in the cost of living if the quality change is not accounted for.

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Definitions:

Total Revenue

Total Revenue is the total amount of money received by a company from its sales of goods or services, before any expenses are subtracted.

Marginal Cost

The increase in total cost that arises from producing one additional unit of a product.

Business License

A legal authorization granted by a governmental body allowing individuals or companies to operate a business within a specific jurisdiction.

Tax

A compulsory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund government spending and various public expenditures.