4. The small economy of Pizzania produces three goods (bread, cheese, and pizza), each produced by a separate company. The bread and cheese companies produce all the inputs they need to make bread and cheese, respectively. The pizza company uses the bread and cheese from the other companies to make its pizzas. All three companies employ labor to help produce their goods, and the difference between the value of goods sold and the sum of labor and input costs is the firm’s profit. The accompanying table summarizes the activities of the three companies when all the bread and cheese produced are sold to the pizza company as inputs in the production of pizzas.

Components of GDP in 2009 Category (billions of dollars)

Consumer spending Durable goods $1,034.4 Nondurable goods 2,223.3 Services 6,835.0 Private investment spending Fixed investment spending 1,747.9 Nonresidential 1,386.6 Structures 480.7 Equipment and software 906 Residential 361.3 Change in private inventories –125.0 Net exports Exports 1,560.0 Imports 1,950.1 Government purchases of goods and services and investment spending Federal 1,444.9 National defense 779.1 Nondefense 365.8 State and local 1,788.4 Bread Cheese Pizza company company company Cost of inputs $0 $0 $50 (Bread)

35 (Cheese)

Wages 15 20 75 Value of output 50 35 200