Suppose there are only two firms in an economy: Cowhide,Inc.produces leather and sells it to Couches,Inc. ,which produces and sells leather furniture.With each $1,000 worth of leather that it buys from Cowhide,Inc. ,Couches,Inc.produces a couch and sells it for $2,600.Neither firm had any inventory at the beginning of 2015.During that year,Cowhide produced enough leather for 25 couches.Couches,Inc.bought 80% of that leather for $20,000 and promised to buy the remaining 20% for $5,000 in 2016.Couches,Inc.produced 20 couches during 2015 and sold each one during that year for $2,600.What was the economy's GDP for 2015?

Question

Quizplus · Accepted Answer

To calculate the GDP, we need to add up the total value of goods and services produced in the economy.
Cowhide produced 25 couches worth of leather, which Couches purchased for $20,000. This counts as Cowhide's contribution to the GDP. 
Couches produced 20 couches and sold them for $2,600 each, totaling $52,000. This counts as Couches' contribution to GDP.
Therefore, the total GDP for 2015 is $20,000 + $52,000 = $57,000. Therefore, the correct answer is (C).

Suppose There Are Only Two Firms in an Economy: Cowhide,Inc