The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne

Exercise 4

Consider this simplified sequence: A farmer starts with a unit of wheat and sells it to a miller for 20 cents. The miller grinds it into flour and sells it to a baker for 50 cents. The baker converts all the flour into a loaf of bread and sells it to a grocer for $2.00. The grocer then sells that bread to a customer for $3.35. How much does GDP increase? What is the total value added by all these stages of production?