Suppose There Are Only Two Firms in an Economy: Cowhide

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 $3,000. Neither firm had any inventory at the beginning of 2009. 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 2010. Couches, Inc. produced 16 couches during 2009 and sold each one during that year for $3,000. What was the economy's GDP for 2009?

A) $48,000
B) $52,000
C) $64,000
D) $68,000