Suppose a Miller Sells Flour to a Baker for $100

question 113

Multiple Choice

Suppose a miller sells flour to a baker for $100.The baker then produces bread from the flour and sells it to Coles for $600.Coles in turn then sells it to the public for $850.The increase in GDP as a result of these transactions will be:

• A)$1550.
• B)$850.
• C)$600.
• D)$100.
• E)indeterminate.

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Definitions:

Profit-Maximizing Level

the output quantity at which a firm achieves the highest possible profit, where marginal revenue equals marginal cost.

Excess Capacity

A situation where a firm is producing at a lower level of output than it has the potential to due to insufficient demand.

Average Total Cost

The total cost of production divided by the number of units produced, representing the per unit cost of production.

Economic Usefulness

The degree to which a product or service can satisfy consumers' needs and desires, thus determining its value in the market.