A Farmer Grows Wheat and Sells It to a Bakery

question 141

Multiple Choice

A farmer grows wheat and sells it to a bakery for $5.The bakery uses the wheat to bake bread and sells it to a distributor for $20.The distributor sells the bread to a supermarket for $30,which then sells the bread to customers for $50.Which of the following is true?

• A)The value added by the distributor is $30.
• B)The value added by the supermarket is more than that added by the bakery.
• C)GDP rises by $50 plus the value added at each stage of production.
• D)Counting the value added at each stage instead of counting the final selling price creates a problem of double counting.
• E)The value added by the farmer is $20 because the wheat,which is worth $5,is necessary for each of the three remaining stages of production.

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Definitions:

Consumer Demand

The desire for particular goods or services that consumers are willing and able to purchase at a given price.

Skimming

A pricing strategy in which a high price is set for a new product to “skim” off customers willing to pay a premium before lowering the price to attract a broader market.

Demand-oriented

An approach to pricing, production, and marketing that focuses on the demand levels and preferences of consumers.

Approximate Price

An estimated cost given for a product or service, offering a ballpark figure that may not account for detailed specifics or potential changes.