Economists agree that the structure of the Consumer Price Index has some problems that limit its usefulness as a reliable measure of inflation. What is one of these drawbacks?
A. It ignores changes in consumption patterns brought about by changes in the relative prices of consumer goods.
B. It is based on the faulty assumption that each consumer buys only one unit of each item.
C. It is based on a market basket of mail-order items and does not include the goods that consumers typically purchase.
D. It is based on the faulty assumption that consumption choices are not influenced by income levels.
Answer: A
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An incentive is
A) a reward or a penalty that encourages or discourages an action. B) when people make rational choices by comparing costs and benefits. C) what you must give up to get something. D) a choice is made on the margin. E) a good or service that satisfies wants.
The value of a basket of goods and services in 2010 and 2012 were $800 and $900, respectively. If 2012was the base year, the price index for this base year was _____
a. 88.9 b. 100 c. 120 d. 112.5
If a country is currently producing inside its production possibilities curve
A. it can increase the production of both goods by putting unemployed resources to work. B. it is experiencing efficient production of one good but not the other. C. it can increase the production of one of the goods only if it reduces the production of the other good. D. None of these are correct.
A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of soybeans is $1 a bushel, the wage rate is $12, the farmer employs six workers and the marginal product of the sixth worker is 10. What would you advise this farmer to do?
A. Increase employment because the wage paid is less than the marginal revenue product. B. Reduce employment because the wage paid is greater than the marginal revenue product. C. Reduce the product price so that the wage and marginal revenue product will be equal. D. Do nothing because the wage rate and the marginal product of the last worker hired are equal.