Asked by Bailey Rayoum on Jun 14, 2024
Verified
The value added by a firm is defined as:
A) the sum of all income earned by the workers in the firm.
B) the firm's actual investment minus planned investment.
C) the value of the product manufactured by the firm plus the transaction costs incurred by the firm.
D) the value of the firm's product minus the cost of materials it bought from other firms.
E) the increase in the value of the firm's stock or bond.
Value Added
Describes the additional worth created at each stage of production or distribution, calculated as the difference between the cost of inputs and the price of outputs.
Transaction Costs
Expenses incurred during the process of buying or selling goods or services, not including the price of the products themselves.
Product Manufactured
Goods that have been created through a process of transformation from raw materials to finished items.
- Explain the concept of value added by a firm and its significance in GDP calculation.
Verified Answer
AA
Anand AggarwalJun 16, 2024
Final Answer :
D
Explanation :
The value added by a firm is defined as the value of the firm's product minus the cost of materials it bought from other firms. This is because the value added by a firm is the contribution it makes to the final value of a product through its production process. It is calculated by subtracting the cost of the inputs (materials bought from other firms) from the value of the output (product manufactured by the firm).
Learning Objectives
- Explain the concept of value added by a firm and its significance in GDP calculation.