Suppose Peuzo produced 400 of its popular new city car in th

Suppose Peuzo produced 400 of its popular new city car in the fourth quarter of 2014. Peuzo has two production costs: labor and intermediate goods. Peuzo pays its workers S30 per hour, and they employed 8,000 work hours. Intermediate goods were bought from Engin for $5000 per car. Engin\'s only input was labor, which cost $160,000 total. In the fourth quarter, Peuzo sold 200 cars to consumers at a price of $10, 000 In the first quarter of 2015, Peuzo produced 500 cars.Peuzo\'s wage per hour went up by 40%. Peuzo employed the same number of work hours. Also, Engin\'s labor costs were the same as in the previous quarter. Peuzo sold to consumers all cars produced in the first quarter of 2015 and the cars left in inventory from the previous quarter. However, Peuzo raised the price of the car to $11000 after a successful marketing campaign that made the new model very popular What was National Income in the fourth quarter of 2014? What was GDP in the first quarter of 2015? (Round to the nearest whole dollar) A. NIQ4:2014= $3. 120.000; GDPQ1 2015-$6,580.000 B. NIQ4:2014-$2,225,000; GDPQ1.2015 = $6,580.000 C. NIQ4:2014= $3.120.000; GDPQ1 2015= $7,700,000 D. N1Q4:2014 = $2, 225,000; GDP21.2015 = $7,700,000

Solution

The answer is C.

In the last quarter of 2014, Income from car sale = 200* 10000 = 2,000,000

Wage Income = 30* 4000 = 120,000 ( for 400 cars , 8000 work hours are required and hence for 200 cars, 4000 work hours will be required)

Income to Eigin for Intermediate goods = 200*5000 = 1,000,000

Total Income = 2,000,000 + 120,000 + 1,000,000 = 3,120,000

In the first quarter of 2015, 500 cars are produced in this quarter and 200 are inventory from last. Hence, the value of total cars or GDP = 700 * 11000 = 7,700,000