Reference no: EM132476834

Assume an economy with a car manufacturer, a car seller, and some consumers (there is no government). The consumers are workers who earn a wage to finance their consumption. In a given year, the car manufacturer produces 200, 000 cars and sells them for $10, 000 per car. The workers' wages take up 70 percent of the car manufacturer's revenue. All the materials used for producing cars are imported from other countries at a cost of $1, 000 per car. Half of the manufactured cars are exported oversea and the remaining cars are sold to the domestic car seller. The car seller sells the domestic cars and imported cars at the same price of $15, 000 per car. The car seller sells all of the domestic cars and 5, 000 units of the imported cars to domestic consumers. After paying $5, 000 for the cost of an imported car, the remaining sales revenue is equally distributed between wages and profits.

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