Author Question: For each city across the U.S., economists construct a price index for a similar basket of goods. In ... (Read 22 times)

Yolanda · **on:** Jul 1, 2018

For each city across the U.S., economists construct a price index for a similar basket of goods. In Los Angeles the index is 127.3 and the index for Dallas is 94.8.

If you have been offered 137,000 for a job in Los Angeles and 117,000 for a similar job in Dallas, which job affords you the highest purchasing power of the bundle of goods in the price index? Use the Los Angeles value as the base.

Question 2

Refer to Scenario 7.1. For 100 cookies, the average total cost is

A) falling.
B) rising.
C) neither rising nor falling.
D) less than average fixed cost.

Jayson · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

Real valueDallas = 127.3(117,000)/94.8 = 157,111. This exceeds the real 137,000 salary for the job in Los Angeles. The Dallas job provides higher purchasing power.

Answer to Question 2

A