One bag of flour is sold for $1.50 to a bakery, which uses the flour to bake bread that is sold for $4.00 to consumers. A second bag of flour is sold to a consumer in a grocery store for $2.00 . Taking these three transactions into account, what is the effect on GDP?
a. GDP increases by $1.50.
b. GDP increases by $3.50.
c. GDP increases by $6.00.
d. GDP increases by $7.50.
C
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When promoting average cost pricing, regulators
A) include what they consider to be a normal rate of return on investment. B) encourage firms to produce at the output level where price equals marginal cost. C) fail to consider a return to investors, so regulated firms often have a hard time raising investment funds. D) inflate costs so much that price ends up as large as would prevail under unregulated monopoly.
An example of a public good would be
A. a plane ride from Miami to Dallas. B. flood control protection from a government authority. C. a commuter's trip to work by car from Berkeley to Chicago. D. a bus ride from Phoenix to Los Angeles.