Final answer:
Prepaid expenses like insurance on a factory building are not recorded as an immediate expense but amortized over the period of coverage. GDP includes current production of goods and services but not non-market transactions, secondary sales, or inputs on their own. Production costs differ greatly by industry.
Step-by-step explanation:
Which of the following costs should not be recorded as an expense in the period incurred? Among the provided options, insurance on a factory building should not be counted as an expense in the period incurred because it is considered a prepayment for future periods and will be expensed over time as it's used, commonly referred to as prepaid expense.
Turning to the Gross Domestic Product (GDP), not every economic activity is included. The cost of hospital stays (a) would be included in GDP as it's a service sold in the market. However, the rise in life expectancy over time (b) is not a market transaction and thus, not included. Child care provided by a licensed day care center (c) is included in GDP since it is a paid service, whereas child care provided by a grandmother (d) is usually not a paid transaction and not counted. A used car sale (e) does not contribute to GDP as it is not a new production—GDP measures current production. In contrast, a new car sale (f) is included. The greater variety of cheese available (g) does not directly affect GDP, though increased purchases would. Lastly, the iron that goes into making steel for a new refrigerator (h) would be included, but only as part of the final value of the refrigerator since GDP avoids double counting goods.
Production costs vary widely across industries. For instance, car manufacturing involves notable fixed and variable costs for machinery and materials, while software production might have higher costs in research and development. A hair salon might have lower fixed costs and fast-food restaurants might have high costs tied to location and equipment.