In 1949 the city of Sherbrooke, Quebec, built a hospital for about $500 000. In 1987 the city restored its courthouse for about $2.4 million. A price index for nonresidential construction was 14 in 1949, 92 in 1987, and 114.5 in 2000. According to these numbers, what did the hospital cost approximately?

Question

Quizplus · Accepted Answer

To find the cost of the hospital in 2000 dollars, we need to use the price index to adjust for inflation.

First, we need to find the inflation factor from 1949 to 2000:
Inflation factor = price index in 2000 / price index in 1949 
Inflation factor = 114.5 / 14 
Inflation factor = 8.18

Next, we multiply the original cost of the hospital by the inflation factor to get the cost in 2000 dollars:
Cost of hospital in 2000 dollars = $500 000 x 8.18 
Cost of hospital in 2000 dollars = $4 090 000

Therefore, the hospital cost approximately $4.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars ($2.4 million). The answer is D.

In 1949 the City of Sherbrooke, Quebec, Built a Hospital