Asked by Santosh Poudel on Jun 13, 2024
Verified
If a firm hires labor for $8,000,pays rent of $4,000,buys raw materials for $13,000 from another firm,earns profits of $1,200,and sells its output for $31,000,the value added by the firm is _____.
A) $4,800
B) $10,000
C) $18,000
D) $25,000
E) $26,200
Value Added
The enhancement a company gives its product or service before offering the product to customers, essentially the difference between the cost of inputs and the value or price of outputs.
Raw Materials
The basic materials from which products are made, typically extracted natural resources or agricultural products.
- Describe the idea of a company contributing added value and its role in Gross Domestic Product computation.
Verified Answer
CT
Carlos ThomasJun 16, 2024
Final Answer :
C
Explanation :
Value added by the firm is calculated by subtracting the cost of its inputs from the selling price of its output.
Value added = Selling price - Cost of inputs
= $31,000 - ($8,000 + $4,000 + $13,000)
= $31,000 - $25,000
= $6,000
Thus, the value added by the firm is $6,000, which is closest to answer choice C ($18,000). None of the other answer choices are close to the actual value added.
Value added = Selling price - Cost of inputs
= $31,000 - ($8,000 + $4,000 + $13,000)
= $31,000 - $25,000
= $6,000
Thus, the value added by the firm is $6,000, which is closest to answer choice C ($18,000). None of the other answer choices are close to the actual value added.
Learning Objectives
- Describe the idea of a company contributing added value and its role in Gross Domestic Product computation.