Last year your job at the university cafeteria paid you $9 an hour and the price of a ten-minute long distance call to your girlfriend in California was $4. This year your cafeteria job pays $9.90 per hour and the ten-minute phone call now costs $4.10. You are clearly
A) worse off because of inflation.
B) worse off because the phone call is now relatively more expensive.
C) better off because your wage rate went up.
D) better off because the phone call now costs less work.

Question

Quizplus · Accepted Answer

Your wage increased by 10% (from $9 to $9.90), while the cost of the phone call increased by only 2.5% (from $4 to $4.10). Therefore, the phone call now costs less of your work time, making you better off.

Last Year Your Job at the University Cafeteria Paid You