Answer to Question #50394 in Macroeconomics for abdulla sabit

Question

Suppose, in an economy, there are only two firms, a potato producer and a catsup producer
and all tomatoes are used as immediate goods to produce catsup.The income
statement are shown below:
(Figure in billion $)
Tomato Producer ------ Amount($) Catsup Producer ----- Amount($)
Sales of tomato 200 Sales of tomato 500
Wages 100 Wages 150
Interest 20 Interest 30
Rent 25 Rent 40
Depreciation 10 Depreciation 10
Indirect business taxes 5 Indirect business taxes 10
Tomatoes 200
a.What is the profit for firm?
b.What is the value of GNP and NNP of that economy?
c.What is the value added in each firm?
d. What is the value of national income in that economy?

Answer 1

a. The profit for catsup producer is:
TP = 500 - 150 - 30 - 40 - 10 - 10 = $260 billion
The profit for tomato producer is:
TP = 200 - 100 - 20 - 25 - 10 - 5 = $40 billion
b. GNP = Interest + rent + profit + wages + indirect taxes + depreciation = 500 + 200 = $700 billion
NNP = GNP - depreciation = 700 - 20 = $680 billion
c. The value added in each firm is 200 and 500 respectively.
d. The value of national income in that economy is 500 - 200 = $300 billion.