For each city across the U.S., economists construct a price index ...

[Yolanda]

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]

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

[Yolanda]

Thanks for the timely response, appreciate it

[aliotak]

Gracias!