The amount by which the value of a firm's output exceeds the value of the goods and services that the firm purchases from other firms is called _____.
A) profit
B) value added
C) the markup rate
D) the marginal product

Question

Quizplus · Accepted Answer

Value added is the amount by which the value of a firm's output exceeds the value of the goods and services that the firm purchases from other firms. It represents the contribution of the firm to the economy and is a measure of its productivity. Option A is not correct because profit is the difference between revenue and costs, which may include expenses incurred outside the production process, such as interest payments, taxes, and dividends. Option C is not correct because the markup rate is the percentage by which the price of a product exceeds its cost of production, and it does not take into account the value of the inputs used by the firm. Option D is not correct because the marginal product is the additional output that is produced when one more unit of input is added to the production process, and it does not reflect the value of the output relative to the value of the inputs.

The Amount by Which the Value of a Firm's Output