Which of the Following Transactions Would Be Counted Toward This

question 196

Multiple Choice

Which of the following transactions would be counted toward this year's GDP?

• A)General Motors purchases 10,000,000 tires from Firestone.
• B)A 300-year-old painting is sold for $12 million.
• C)A street gang earns $2 million from selling illegal drugs.
• D)Your real estate agent earns $5,000 commission when you sell your 100-year-old house for $100,000.

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Definitions:

Specialization

The process of focusing effort and resources on a limited number of activities, goods, or services to gain a comparative advantage in production.

Decreasing Returns To Scale

Long-run average total cost increases as output increases (also known as diseconomies of scale).

Economies Of Scale

The cost advantages that enterprises obtain due to their scale of operation, typically resulting in cost per unit of output decreasing with increasing scale.

Diminishing Returns

A principle stating that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.