Consider a Firm Whose Final Output (And Sales)in a Particular

question 12

Essay

Consider a firm whose final output (and sales)in a particular year has a value of $1,200.To produce these goods,the firm used $500 worth of intermediate goods it had purchased in previous years plus $200 worth of newly-purchased intermediate goods.In the subsequent year,this same firm again sells $1,200 worth of final goods,but in this year has purchased $700 worth of intermediate goods,of which $100 is not used in current production but,rather,added to the firm's inventory.For each of these two years,calculate the value added by this firm.For each of these two years,calculate the contribution of this firm to the economy's GDP.

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Definitions:

Marginal Cost

The increase or decrease in the total cost of a production run for making one additional unit of an item.

Marginal Benefit

The additional satisfaction or utility gained by consuming an extra unit of a good or service.

Diamond

A naturally occurring gemstone composed of carbon, known for its hardness and brilliance, often used in jewelry.

Marginal Analysis

The examination of the costs and benefits of a small (marginal) change in the production of goods or services.