## [answered] A city is considering creating a park out of the only large

A city is considering creating a park out of the only large piece of undeveloped land in the area. The residents? demand for the park is graphed below. The park would be of considerable size, easily accommodating all wishing to use it. The land can be purchased for \$15,000, and converting the land into a park costs \$5,000. Based on exam question

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1.

A city is considering creating a park out of the only large piece of undeveloped land in

the area. The residents? demand for the park is graphed below. The park would be of considerable

size, easily accommodating all wishing to use it. The land can be purchased for \$15,000, and

converting the land into a park costs \$5,000. Based on exam question.

35 \$ Price per visit . 30

25

20

15

10

5

0

0 100 200 300 400 500 600 700 800 900 1000 1100 Visits to the Park 2. A. Should the city build the park? Explain. Your answer should include numerical

evidence. B. Suppose the owner of the land donates the land to the city stipulating that the land

must be used to build the park. Should the city build the park? C. Suppose the owner of the land donates the land to the city without specifying its

future use. Should the city build the park? Recall that GDP = C + I + G. How does each item below affect GDP in 2012? Which

component of GDP is affected?

A. A new house is constructed in 2012 1 B. Max sells his house on January 1, 2012, without the help of a realtor. C. The government purchases new textbooks for schools during 2012. D. Throughout 2012, Jack tutors Charlie?s children one day a week, in exchange for

Charlie driving Jack?s children to school each school day. E. A candlemaker makes 500 candles during 2012, but only sells 200 of them during

2012. The remaining 300 candles are added to the candlemaker?s inventories. 2 3. An economy is composed of three firms: Forestry Inc., which harvests trees, which are

used by Lumberjack Inc. to manufacture various lumber products, which are used by

Builders Inc. to produce houses. Lumber is the only raw material used to produce houses.

Lumberjack

Inc.

\$15,000 A: Forestry Inc.

Value of sales

Intermediate goods B: Builders Inc. \$15,000 Total Factor

Income \$100,000

40,000 Wages 6,000 15,000 35,000 G: Interest payments 1,000 3,000 6,000 H: Rent 3,000 D: Profit

Total expenditures

by firm

firm 5,000 4,000 F: 15,000

C: 3,000 I: 40,000

E: J:

100,000

60,000 A. Fill in the missing entries [A-J] in the table. B. Using the value added approach, what is the value of GDP? Explain how you

found this answer using the table as a reference. C. Using the factor income approach, what is the value of GDP? Explain how you

found this answer using the table as a reference. D. Using the aggregate spending on domestically produced final goods and services

approach, what is the value of GDP? Explain how you found this answer using

the table as a reference. 3

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