Questions: Assume an economy where there are two producers: a computer components producer and a computer producer. Assume the computer components producer makes 3,000,000 worth of computer components in the current year, while incurring costs of 1,500,000 in labor and 500,000 in taxes. Suppose the computer components company sells all its product to the computer producer who builds five supercomputers. The costs of the computer producer include 3,000,000 in computer components, 800,000 in labor, and 200,000 in taxes. Suppose that the computer producer sells two of the supercomputers for 1,000,000 each to the domestic government, 1 supercomputer for 1,000,000 to a foreign government, and at the end of the year it had not sold the fourth and fifth computer. The unsold computers are carried on the computer manufacturer's books as an 2,000,000 increase in inventory. Using the income approach, what is the total cost for the computer producer? 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000

Assume an economy where there are two producers: a computer components producer and a computer producer. Assume the computer components producer makes 3,000,000 worth of computer components in the current year, while incurring costs of 1,500,000 in labor and 500,000 in taxes. Suppose the computer components company sells all its product to the computer producer who builds five supercomputers. The costs of the computer producer include 3,000,000 in computer components, 800,000 in labor, and 200,000 in taxes. Suppose that the computer producer sells two of the supercomputers for 1,000,000 each to the domestic government, 1 supercomputer for 1,000,000 to a foreign government, and at the end of the year it had not sold the fourth and fifth computer. The unsold computers are carried on the computer manufacturer's books as an 2,000,000 increase in inventory. Using the income approach, what is the total cost for the computer producer? 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000
Transcript text: Assume an economy where there are two producers: a computer components producer and a computer producer. Assume the computer components producer makes $\$ 3,000,000$ worth of computer components in the current year, while incurring costs of $\$ 1,500,000$ in labor and $\$ 500,000$ in taxes. Suppose the computer components company sells all its product to the computer producer who builds five supercomputers. The costs of the computer producer include $\$ 3,000,000$ in computer components, $\$ 800,000$ in labor, and $\$ 200,000$ in taxes. Suppose that the computer producer sells two of the supercomputers for $\$ 1,000,000$ each to the domestic government, 1 supercomputer for $\$ 1,000,000$ to a foreign government, and at the end of the year it had not sold the fourth and fifth computer. The unsold computers are carried on the computer manufacturer's books as an \$2,000,000 increase in inventory. Using the income approach, what is the total cost for the computer producer? $\$ 5,000,000$ $\$ 4,000,000$ $\$ 3,000,000$ $\$ 2,000,000$ \$1,000,000
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Solution

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The answer is B: \$4,000,000.

Explanation:

To determine the total cost for the computer producer using the income approach, we need to consider the costs incurred by the computer producer in the production process. The income approach typically involves summing up the costs of production, which include the cost of intermediate goods, labor, and taxes.

  1. Cost of Computer Components: The computer producer purchases computer components worth \$3,000,000 from the computer components producer.

  2. Labor Costs: The computer producer incurs \$800,000 in labor costs.

  3. Taxes: The computer producer pays \$200,000 in taxes.

Adding these costs together gives us the total cost for the computer producer:

  • Cost of Computer Components: \$3,000,000
  • Labor Costs: \$800,000
  • Taxes: \$200,000

Total Cost = \$3,000,000 + \$800,000 + \$200,000 = \$4,000,000

Therefore, the total cost for the computer producer is \$4,000,000.

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