What is the value added at each stage stage 1 stage 2 stage3 stage 4 how much does this output contribute to GDP? how much would the output contribute to GDP if the lumber were imported from Canada?
What is the value added at each stage stage 1 stage 2 stage3 stage 4 how much does this output contribute to GDP? how much would the output contribute to GDP if the lumber were imported from Canada?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
What is the value added at each stage
stage 1
stage 2
stage3
stage 4
how much does this output contribute to
how much would the output contribute to GDP if the lumber were imported from Canada?

Transcribed Image Text:**Title: Understanding the Stages of Furniture Production and GDP Contribution**
Suppose that furniture production encompasses the following stages:
- **Stage 1**: Trees are sold to a lumber company ($1,000).
- **Stage 2**: Lumber is sold to a furniture company ($2,500).
- **Stage 3**: The furniture company sells furniture to a retail store ($6,000).
- **Stage 4**: The furniture store sells furniture to the consumer ($12,000).
**Instructions**: Enter your responses rounded to the nearest whole number.
### Questions:
**a. What is the value added at each stage?**
- **Stage 1**: $ _______
- **Stage 2**: $ _______
- **Stage 3**: $ _______
- **Stage 4**: $ _______
**b. How much does this output contribute to GDP?**
- $ _______
### Explanation of Calculation:
**Value Added**: The value added at each stage is calculated by subtracting the cost of the previous stage from the current stage.
1. **Stage 1**: Since this is the initial stage, the value added is the entire amount:
- $1,000
2. **Stage 2**: Subtract the cost of trees (Stage 1) from the cost of lumber (Stage 2):
- $2,500 - $1,000 = $1,500
3. **Stage 3**: Subtract the cost of lumber (Stage 2) from the cost of furniture sold to the retail store (Stage 3):
- $6,000 - $2,500 = $3,500
4. **Stage 4**: Subtract the cost of furniture sold to the retail store (Stage 3) from the cost of furniture sold to the consumer (Stage 4):
- $12,000 - $6,000 = $6,000
**Total Contribution to GDP**: To determine the total contribution to GDP, sum the value added at each stage:
- $1,000 (Stage 1) + $1,500 (Stage 2) + $3,500 (Stage 3) + $6,000 (Stage 4) = $12,000
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