Suppose There Are Only Two Firms in an Economy: Cowhide,Inc

Multiple Choice

Suppose there are only two firms in an economy: Cowhide,Inc.produces leather and sells it to Couches,Inc.,which produces and sells leather furniture.With each $1,000 of leather that it buys from Cowhide,Inc.,Couches,Inc.produces a couch and sells it for $2,000.Neither firm had any inventory at the beginning of 2006.During that year,Cowhide produced enough leather for 20 couches.Couches,Inc.bought 80% of that leather for $16,000 and promised to buy the remaining 20% for $4,000 in 2007.Couches,Inc.produced 16 couches during 2006 and sold each one during that year for $2,000.What was the economy's GDP for the year?

A) $32,000
B) $36,000
C) $40,000
D) $52,000