Company DEF produces gizmos. One particular batch cost $50,000 to produce. Because market conditions were bad at the time of sale, they were sold at a loss for $40,000. The value of the gizmos included in the GDP is
A) $10,000.
B) $40,000.
C) $50,000.
D) impossible to compute because there is negative profit.

Question

Quizplus · Accepted Answer

The value of the gizmos in the GDP is based on their selling price, not the cost of production. Since they were sold for $40,000, that is the value included in the GDP. The fact that the sale resulted in a loss for the company is not relevant to the calculation of the GDP.

Company DEF Produces Gizmos