Exhibit 18-1 -In a Simple Economy, Wanda's Weavers Grows Cotton and Weaves

question 149

Multiple Choice

Exhibit 18-1

-In a simple economy, Wanda's Weavers grows cotton and weaves it into cloth. In the current year, Wanda's Weavers produces cloth valued at $1,000, half of which it sells directly to consumers for their own personal use and half of which it sells to Joe's T-shirts. Joe's T-shirts produces T-shirts valued at $1,500 for the current year. What is the value of GDP in this simple economy?

• A)$2,500
• B)$1,500
• C)$500
• D)$1,000
• E)$2,000

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Definitions:

Total Costs

The sum of all costs associated with the production of a good or service, including both fixed and variable costs.

Eighth Customer

Refers abstractly to a particular order or position of a customer, often without a specific context.

Marginal Benefit

The extra pleasure or benefit obtained from consuming an additional unit of a product or service.

Marginal Cost

Marginal cost is the increase in total cost that arises from producing one additional unit of a product or service.