Asked by vaughn peens on May 22, 2024
Verified
If a firm hires labor for $20,000,pays rent of $12,000,buys raw materials for $6,000 from another firm,earns profits of $3,000,and sells its output for $41,000,the value added by the firm is _____.
A) $0
B) $15,000
C) $35,000
D) $38,000
E) $41,000
Value Added
Value added refers to the additional value created at each stage of production or service, calculated as the sales revenue minus the cost of raw materials and intermediate goods.
Raw Materials
The basic substances or components that are processed or refined to create goods and products.
- Detail the concept of a firm augmenting value and its impact on Gross Domestic Product assessment.
Verified Answer
AO
Allie O'LoughlinMay 27, 2024
Final Answer :
C
Explanation :
The value added by the firm is calculated as the difference between its sales and the cost of goods or services bought from other firms. Here, it's $41,000 (sales) - $6,000 (cost of raw materials from another firm) = $35,000. The costs of labor and rent are part of the firm's value-added, not deductions from it.
Learning Objectives
- Detail the concept of a firm augmenting value and its impact on Gross Domestic Product assessment.