The market for education at UB is currently in equilibrium. Suppose that UB announces that a new library, which contains plentiful books and comfortable study spaces, will be constructed. How does this affect the price (i.e. tuition and fees) and quantity (i.e. the number of students) in equilibrium?

a.Pe will increase, but Qe will decrease.

b.Pe will increase, but how Qe will change is ambiguous.

c.Pe will decrease, but Qe will increase.

d.Qe will decrease, but how Pe will change is ambiguous.

Quality bias will cause the CPI to ___________ the price level because the CPI ______________.

a.Underestimate; may not fully account for improvements in the quality of goods over time.

b.Overestimate; may not fully account for improvements in the quality of goods over time.

c.Underestimate; does not account for changes in the prices of high quality goods as much as low quality goods.

d.Overestimate; does not account for changes in the prices of high quality goods as much as low quality goods.