Question

Firm A produces 1,000 units of output at a cost of $20 each. Firm A sells all 1,000 units of output to Firm B at a price of $25 each. Firm B produces 120 units of output using the 1,000 units of output that it purchased from Firm A. The total cost of producing the 120 units was $60,000, or $500 per unit. Firm B sold 90 units to consumers for $600 each and did not sell the remaining units this year. There are no other firms in the economy. What is the value of GDP in this economy? Enter a whole number without commas or dollar signs.

Answer 1

Sol :

GDP is the sum Total of value of goods and services produced in the economy during a particular period of time.

GDP = Value added by the Producers.

So,

Value added by Firm A = $5 × 1000 = $5000

Value added by Firm B = 120 × $100 =$12000

GDP = $5000 + $12000

= $17000

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