Question

In 1949, Sycamore, Illinois built a hospital for about $500,000. In 1987, the county restored the courthouse for about $1.7 million. A price index for nonresidential construction was 24 in 1949, 108 in 1987, and 126.5 in 2000. According to these numbers, the hospital cost about
a.$2.1 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.

b.$2.1 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.

c.$2.6 million in 2000 dollars, which is less than the cost of the courthouse restoration in 2000 dollars.

d.$2.6 million in 2000 dollars, which is more than the cost of the courthouse restoration in 2000 dollars.

Answer 1

Answer:

Option (d) is correct.

Explanation:

Given that,

Price index in 1949 = 24

Price index in 1987 = 108

Price index in 2000 = 126.5

Cost of building hospital in 1987 = $500,000

According to these numbers, the hospital cost in 2000 is about:

= Cost of building hospital in 1987 × (Price index in 2000 ÷ Price index in 1949)

= $500,000 × (126.5 ÷ 24)

= $500,000 × 5.27

= $2,635,417 > $1.7 million

Therefore, it is more than the cost of the courthouse restoration in 2000 dollars.