Question

In the first stage of manufacturing each final unit of a​ product, a firm purchases a key input at a price of ​$4 per unit. The firm then pays a wage rate of ​$4 for the time that labor is​ exerted, combining an additional ​$3 of inputs for each final unit of output produced. The firm sells every unit of the product for ​$13.What is the contribution of each unit of output to GDP in the current year?

The contribution of each unit of output to GDP in the current year is?

Answer 1

Answer:

The contribution of each unit of output to the GDP in the current year is $2.

Explanation:

Based on the Value Added Method of calculating GDP,we know that GDP of any country=Value of goods and services(VGS)-Intermediate Consumption(IC).In this case,the VGS per unit of output is given as $13.The firm pays an input price of $4 per unit,an additional $3 for input for each unit of final output and $4 as labor expense.

Therefore,IC in this case=$( 4+ 4+ 3)$=$11

Based on the value added method of GDP calculation,the contribution of each unit of output to the GDP in the current year=$( 13- 11)$=$2

Hence,each unit output contribution to the current year GDP is $2.