If a used car dealer purchases a used car for $3,000, makes repairs and refurbishes it, then sells it for $8,000, the
A) dealer contributes value added equal to $5,000, but nothing is added to GDP.
B) dealer contributes value added equal to $5,000, and consequently $5,000 is added to GDP.
C) dealer contributes nothing to production because only existing goods are involved.
D) dealer contributes value added equal to $8,000, but only $5,000 is added to GDP.

Question

Quizplus · Accepted Answer

The dealer contributes value added of $5,000 ($8,000 sale price minus $3,000 purchase price) by repairing and refurbishing the used car. This increase in value is considered as an addition to GDP.

If a Used Car Dealer Purchases a Used Car for $3,000