macro_tif1_ch07

Profitisthe differencebetween diff3 thetotal sales

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: ding: Analytic Skills Special Feature: Solved Problem: Calculating 48. GDP Table 7-7 Bottled Water Oranges 600 800 1.00 0.75 Refer to Table 7-7. Suppose that a simple economy produces only four goods and services: sweaters, CDs, sugar, and soft drinks. Assume one half of the sugar is used in making the soft drinks and the other half of the sugar is purchased by households. Calculate nominal GDP for this simple economy. Answer: Nominal GDP equals (50 x $40) + (150 x $15) + ((600 x .5) x $1)) + (800 x 0.75) Diff: 3 = $5,150. Type: SA Page Ref: To pic : 636/216 M S Analytical Objective: LO1: Explain how total production is measured AACSB Coding: Analytic Skills Special Feature: Solved Problem: Calculating 49. GDP If the value added of a firm is positive, will the firm necessarily have positive profits? Answer: No. Value added equals the price of the firm's product minus the cost of intermediate goods. The intermediate goods are converted to the firm's profits by the application of such resources as labor, capital, and entrepreneurship. Profit is the difference between Diff: 3 the total sales revenue and the opportu nity cost of all the resource s used to make the product. Type: SA Page Ref: To pic : 641-2/221-2 M S Conceptual Objective: LO1: Explain how total production is measured AACSB Coding: Analytic Skills Special Feature: None 50. How can have a negative valued added, as supposedly some state-owned businesses did in the former Soviet a firm Union? What has to be true for value added to be negative? Answer: A negative value added means that the cost of the intermediate goods exceeds the price of the final product produced using the intermediate goods. For value added to be negative, a firm would use its primary factors of production, such as labor and capital equipment, to produce a product Diff: 3 from the intermed iate goods that is less valuable than the intermed iate goods themsel ves. Type: SA Page Ref: To pic : 641-2/221-2 M S Conceptual Objective: LO1: Explain how total production is measured AACSB Coding: Analytic Skills Special Feature: None 7.2 Does GDP Measure What We Want It to Measure? 1. The s and Vietnam have roughly the same size population. Suppose the GDP of the Philippines is $1,000 Philippine billion and the GDP of Vietnam is $10,000 billion. You should conclude A) it is not possible comparison of the economic well being of a typical individual in the 2 countries without additional to make a good information. B) a typical person in Vietnam is less than 10 times as well off as the typical person in the Philippines. C) a typical person in Vietnam is 10 times as well off as the typical person in the Philippines. D) a typical person in Vietnam is more than 10 times as well off as the typical person in the Philippines. Answer: A Diff: 2 Type: MC Page Ref: To pic : 633/213 S S Conceptual Objective: LO2: Discuss whether GDP is a good measure AACSB Coding: of wellbeing Reflective Thinking Special Feature: Economics in YOUR Life!: What's the Best Count...
View Full Document

This note was uploaded on 09/21/2012 for the course ECON 2010 taught by Professor Roussel during the Spring '08 term at LSU.

Ask a homework question - tutors are online