There are three firms in an economy: A, B, and C. Firm A buys $350 worth of good

Question

There are three firms in an economy: A, B, and C. Firm A buys $350 worth of goods from firm B and $150 worth of goods from firm C, and produces 250 units of output, which it sells at $4 per unit. Firm B buys $200 worth of goods from firm A and nothing from firm C, and produces 250 units of output, which it sells at $6 per unit. Firm C buys $300 worth of goods from firm A and $100 worth of goods from firm B. It produces output worth $800. All other products are sold to consumers. Instructions: Round your answers to the nearest whole dollar amount. a) Calculate GDP. GDP = $ b) If a value-added tax (a tax on the total value added by each firm) of 15 percent is introduced, how much revenue will the government get? Revenue $ c) How much would government get if it introduced a 15 percent income tax? Revenue $ d) How much would government get if it introduced a 15 percent sales tax on final output? Instructions: Round your answer to the nearest whole dollar amount. $

Explanation / Answer

requested to change the numbers and calculte

Firm A
Cost: 250 + 200 = $450
Revenue: 200*$5 = $1,000
Value added: $(1000 - 450) = $550

Firm B
Cost: 100 + 150 = $250
Revenue: 300*$7 = $2,100
Value added: $(2100 - 250) = $1850

Firm C:
Cost: 50 + 0 = $50
Revenue: $1,000
Value added: $(1000 - 50) = $950

Total Value Added: $550 + 1850 + 950 = $3350

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