/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} Q. 2 In the first stage of manufactur... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 8: Q. 2 (page 185)

In the first stage of manufacturing each final unit of a product, a firm purchases a key input at a price of \(4 per unit. The firm then pays a wage rate of \)3 for the time that labor is exerted, combining an additional \(2 of inputs for each final unit of output produced. The firm sells every unit of the product for \)10. What is the contribution of each unit of output to GDP in the current year?

Short Answer

Expert verified

Therefore, each production unit contributes $ 10 to this year's GDP.

Step by step solution

01

- Introduction

Gross domestic product (GDP) is the ultimate value of all goods and services produced within the border.

02

Step 2- Explanation

Assuming the company buys theinput at a price of $ 4 per unit, the company pays a wage rate of $ 3 for each last unit of output produced, along with an additional $ 2 input. The company sells each product unit for $ 10. GDP can be calculated in a variety of ways, but the value-added method eliminates the possibility of double calculations. In the value-added method, the final value of the process is equal to the price of the goods. Therefore, the contribution of each production unit to GDP is $ 10.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Explain in your own words why the flow of gross domestic product during a given interval must always be equivalent to the flow of gross domestic income within that same period.

Suppose that in 2019, geologists discover large reserves of oil under the tundra in Alaska. These new reserves have a market value estimated at \(50 billion at current oil prices. Oil companies spend \)1 billion to hire workers and move and position equipment to begin exploratory pumping during that same year. In the process of loading some of the oil onto tankers at a port, one company accidentally spills some of the oil into a bay and by the end of the year pays $1 billion to other companies to clean it up. The oil spill kills thousands of birds, seals, and other wildlife. What was the combined effect of these events on GDP for this year? (Hint: Which transactions took place in the markets for final goods and services?) In what ways, if any, does the effect on GDP reflect a loss in national welfare?

Explain the expenditure and income approaches to tabulating GDP.

Based on the information in Table 8-3, in what years was the economy in a recession? Explain briefly.

Each year after a regular spring cleaning, Maria spruces up her home a little by retexturing and repainting the walls of one room in her house. In a given year, she spends \(25on magazines to get ideas about wall textures and paint shades, \)45on newly produced texturing materials and tools, \(35on new paintbrushes and other painting equipment, and \)175on newly produced paint. Normally, she preps the walls, a service that a professional walltexturing specialist would charge \(200to do, and applies two coats of paint, a service that a painter would charge \)350to do, on her own.

a. When she purchases her usual set of materials and does all the work on her home by herself in a given spring, how much does Maria's annual spring texturing and painting activity contribute to GDP?

b. Suppose that Maria hurt her back this year and is recovering from surgery. Her surgeon has instructed her not to do any texturing work, but he has given her the go-ahead to paint a room as long as she is cautious. Thus, she buys all the equipment required to both texture and paint a room. She hires someone else to do the texturing work but does the painting herself. How much would her spring painting activity add to GDP?

c. As a follow-up to part (b), suppose that as soon as Maria bends down to dip her brush into the paint, she realizes that painting will be too hard on her back after all. She decides to hire someone else to do all the work using the materials she has already purchased. In this case, how much will her spring painting activity contribute to GDP?
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.