Which one of the following statements is true?
A) If the money price of a good increases, its relative price necessarily increases.
B) If the money price of a good increases, its relative price necessarily decreases.
C) The relative price of a good refers to the opportunity cost of purchasing it.
D) Rational consumers always ignore the monetary price of a good when deciding whether to buy it.

Question

Quizplus · Accepted Answer

The relative price of a good refers to its opportunity cost, which is the value of the next best alternative foregone when making a decision to purchase. Therefore, option C is correct. Option A is incorrect because an increase in the money price of a good can result in either an increase or decrease in its relative price, depending on the price level of other goods. Option B is also incorrect for the same reason. Option D is incorrect because rational consumers consider both the monetary price and opportunity cost of a good when deciding whether to buy it.

Which One of the Following Statements Is True