Question

In: Economics

Farmer produces 20 units of wheat using labor; Miller produces 15 units of flour using 20...

Farmer produces 20 units of wheat using labor; Miller produces 15 units of flour using 20 wheat and labor; Miller sells 5 units flour directly to consumers and sells the rest 10 units to Baker; Baker produces 10 units of bread using 10 unit of flour and labor. What is GDP based on the price information below?

Pbread = 4; Pflour = 2; Pwheat = 1.

Please calculate based on the value-added approach. (10 points)

Please calculate based on the expenditure approach. (10 points)

Expert Solution

Value added approach include value of final good only and it does not consider value of intermediate good in calculating value of GDP.

Final goods are those goods which are use for final consumption.

Intermediate goods are those goods which are used for further production.

All the 20 units of wheat is used as intermediate good to produce flour. So its value will not be included.

Total amount of flour produced= 15 units. Out of this, 5 units is for consumer as final good so its value will be included and 10 units of flour value will not be included because it is an intermediate good for bread.

Value of flour to consumer= 5 x 2= 10

All the bread production is final good.

Value of bread= 10 x 4= 40

GDP(value added approach)= 10+40= 50

----------------------------------------------------------------------------------------------------------------------------------------------------------

Expenditure approach include all the expenditure in the economy.

GDP= Expenditure by miler to buy wheat+Expenditure by consumer to buy flour+Expenditure by baker to buy flour

GDP= 20 x 1 + 5 x 2 + 10 x 2= 20+10+20= 50

Rahul Sunny answered 2 years ago

A Farmer produces $200,000 in wheat and pays wages to her workers of $120,000. A Miller...

A Farmer produces $200,000 in wheat and pays wages to her workers of $120,000. A Miller buys all $200,000 of wheat from the farmer and turns it into $300,000 worth of flour. The Miller pays $40,000 in wages, sells $50,000 of flour to households and sells the remainder to a baker. The baker buys $250,000 in flour from the Miller, pays $100,000 in wages to workers and sells $500,000 worth of bread to the public. Briefly discuss the three approached...

A farmer grows a bushel of wheat and sells it to a miller for $1.00. The...

A farmer grows a bushel of wheat and sells it to a miller for $1.00. The miller turns the wheat into flour and then sells the flour to a baker for $3.00. The baker uses the flour to make bread and sells the bread to an engineer for $6.00. The engineer eats the bread. What is the value added by each person? What is GDP?

Assume one pound of raw wheat produces 0.85 pounds of retail flour. If 135 billion pounds...

Assume one pound of raw wheat produces 0.85 pounds of retail flour. If 135 billion pounds of wheat is produced and made into flour, what is the retail-equivalent of wheat production?

The farmer produces 899 bushels of wheat at a total cost of $6 per bushel. He...

The farmer produces 899 bushels of wheat at a total cost of $6 per bushel. He sells all of the wheat to Firm F for $11 per bushel. Firm F produces 500 pounds of flour from the wheat at a total cost of $23 per pound (including the amount paid to the farmer for the wheat). Firm F sells 475 pounds of flour to consumers for $31 per pound. There are no other firms in this simple economy. What is...

The U.S. produces 6 buschels of wheat in 1 labor hour and 3 yards of cloth...

The U.S. produces 6 buschels of wheat in 1 labor hour and 3 yards of cloth in 1 labor hour. The U.K. producers 1 bushel of wheat in 1 labor hour and 2 yards of cloth in 1 labor hour. Assume the wage rate per labor-hour is $6 in the U.S. and £1.8 in the U.K. 1) Which commodity will the U.S. import and export if the exchange rate between the $ and the £ is £1=$1? 2) When will...

Philsbury Company buys 12,000 units of standard flour for $140,000 and refines it using a special...

Philsbury Company buys 12,000 units of standard flour for $140,000 and refines it using a special sifting process. One unit of standard flour can be turned into 3 cups of baking flour and 9 cups of bread flour. The baking flour can be sold for $4.60 per cup and the bread flour for $3.10 per cup at split-off point.. Philsbury puts the baking flour through a second process so it becomes super fine. This costs an additional $0.75 per cup...

6. The country of Pugelovia has an endowment of 20 units of labor and 5 units...

6. The country of Pugelovia has an endowment of 20 units of labor and 5 units of land, whereas the rest of the world has 80 units of labor and 10 units of land. Based on your calculation, is Pugelovia labor or land abundant? _________________ Write down the pre trade price rations, labor capital ratios and the w/r before trade! Given that Wheat is land intensive (x) and cloth is labor intensive (y), write explain and illustrate – (1) Which...

Say Argentina and England both produce wheat and cloth. They both have 1000 units of labor....

Say Argentina and England both produce wheat and cloth. They both have 1000 units of labor. In Argentina it takes 10 units of labor to make 1 bushel of wheat and 20 units of labor to make 1 yard of cloth. In England it takes 10 units of labor to make 1 bushel of wheat and 10 units of labor to make 1 unit of cloth. What is the comparative advantage good of each country? Why? Based on this, what...

The firm is currently using 900 units of labor and 150 units of capital to produce...

The firm is currently using 900 units of labor and 150 units of capital to produce 200,000 units of output. At this combination the marginal product of labor is 25 and the marginal product of capital is 60. The price of labor is $50 and the price of capital is $30. a. The MP per dollar of labor is _________ and the MP per dollar of capital is _________. b. The firm can increase capital by one unit and decrease...

Norman Borlaug has a wheat farm which produces 20,000 units and typically can produce them for...

Norman Borlaug has a wheat farm which produces 20,000 units and typically can produce them for $0.58 each with fixed costs of $3,000. The current market price for wheat forces them to sell their units for $0.71 each. Because of the tough market conditions, one of their competitors is looking to exit the business and instead rent their land out for $4,500 a month. Borlaug believes with the additional land they could produce and sell an extra 80,000 units each...