What is one way to adjust the CPI for substitution bias?
A) Use the Paasche index.
B) Use the Laspeyres index.
C) Multiply the Paasche Index and the Laspeyres index.
D) Take the geometric mean of the Paasche index and the Laspeyres index.
A
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Refer to Table 12-4. If the market price is $45, the firm
A) will earn profit of $1,040. B) will suffer a loss of $200. C) earn a profit of $3,600. D) will break even.
Standard economic theory asserts that sunk costs are irrelevant in making economic decisions, yet studies conducted by behavioral economists reveal that sunk costs often affect economic decisions. Which of the following could explain this observation?
A) Even though sunk costs cannot be recovered, it has been incurred and therefore should be treated as part of the product's value. B) People measure the value of a good in terms of its purchase price. C) Sunk costs have a higher opportunity cost than costs that can be recovered. D) If consumers maximize their utility, it makes sense to consider the full purchase price of a product in their consumption decisions.