Which of the following statements BEST describes a limitation of the Big Mac Index?
A)Profit margins vary by the strength of competition, which affects relative prices.
B)The theory of PPP incorrectly assumes that there are barriers to trade.
C)The Big Mac represents all possible commodities and services.
D)Taxes have no effect on Big Mac prices.

Question

Quizplus · Accepted Answer

The Big Mac Index, while useful for comparing purchasing power and the relative value of currencies, is limited by the fact that profit margins can vary significantly depending on the level of competition in different markets. This variation can affect the prices of Big Macs independently of currency value, thereby distorting the index's accuracy.

Which of the Following Statements BEST Describes a Limitation of the Big