Final answer:
It is false that fair values in a basket purchase of long-lived assets are assigned based on the cost of each asset; fair value should be used instead to allocate the lump sum proportionally.
Step-by-step explanation:
When dealing with a basket purchase of long-lived assets, it is false that the fair values be assigned based on the cost of each asset. Instead, the fair value of each individual asset within the basket should be used to allocate the total cost proportionally among the assets. The use of the term 'basket' implies that multiple assets are acquired together for a lump sum; thus, the acquisition cost must be allocated to the assets based on their individual fair values, not their costs.
This process should be distinguished from the calculation of inflation using a 'basket of goods,' which can suffer from substitution bias and quality/new goods bias. These biases highlight the challenge in measuring inflation accurately, as consumers do not necessarily purchase an identical fixed basket of goods every year, which can lead to a misleading measure of cost of living changes.