There is only one firm in a small island country.The firm produced 1,000 units of Good X during a particular year,out of which it could sell 900 units.If each unit of the good sells for $500,what is the GDP of the country?
A) $40,000
B) $450,000
C) $500,000
D) $150,000

Question

Quizplus · Accepted Answer

The formula for GDP is:
GDP = C + I + G + (X-M)
Where 
C = consumption 
I = investment 
G = government spending 
X = exports 
M = imports

Since this is a small island country with only one firm, we can assume that there is no government spending, no investment, and no exports or imports. Therefore, the GDP of the country is simply the total consumption, which is equal to the total sales of good X, i.e. 900 units x $500 per unit = $450,000.

There Is Only One Firm in a Small Island Country