Author Question: A Consumer Price Index adjustment overcompensates for inflation because it ignores A) the income ... (Read 145 times)

lb_gilbert · **on:** Jul 1, 2018

A Consumer Price Index adjustment overcompensates for inflation because it ignores

A) the income effect when relative prices change.
B) the substitution effect when relative prices change.
C) that some goods are inferior.
D) that the substitution effect may offset the income effect.

Question 2

If a firm goes out of business because of negative economic profits, its books

A) might indicate a positive accounting profit.
B) might indicate that opportunity costs were zero.
C) might indicate that taxes are too high.
D) might suggest a mistaken value of explicit costs.