Question

Firm T produces 600 tires and sells them to Firm B at a cost of $30 each.

Firm F produces 300 bicycle frames and sells them to Firm B for $125 each.

Firm B produces 300 bicycles and sells them to consumers for $300 each.

The contribution to GDP is $______.

Value added by Firm T is $______, value added by Firm F is $______, and value added by Firm B is $______.

Answer 1

$90,000; $18,000; $37,500; $34,500

Step-by-step explanation:

Total contribution to GDP:

= Number of bicycles produces × Selling price of each

= 300 × $300

= $90,000

Value added by Firm T is calculated as follows:

= value of tires sold to Firm B

= Selling price of each tire × No. of tires produced

= $30 × 600

= $18,000

Value added by Firm F is calculated as follows:

= Value of bicycle frames sold to Firm B

= Selling price of each bicycle frame × No. of bicycle frames produced

= $125 × 300

= $37,500

Value added by Firm B:

= Value of bicycles sold to consumers - Cost of purchasing tires from Firm T - Cost of purchasing bicycle frames

= ($300 × 300) - $18,000 - $37,500

= $90,000 - $18,000 - $37,500

= $34,500