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Exhibit: Stages in the Production of an Office Building

-(Exhibit: Stages in the Production of an Office Building) A mining firm extracts iron from the earth. A steel mill converts the iron to steel beams for use in construction. A construction company uses the steel beams to make a building. Assume that the total product of these firms represents the only components of the building and that they will have no other uses. What is the valued-added by Crane Construction?
A) $725,000
B) $825,000
C) $950,000
D) $1,050,000

Question

Use the following to answer questions .
Exhibit: Stages in the Production of an Office Building
 
-(Exhibit: Stages in the Production of an Office Building) A mining firm extracts iron from the earth. A steel mill converts the iron to steel beams for use in construction. A construction company uses the steel beams to make a building. Assume that the total product of these firms represents the only components of the building and that they will have no other uses. What is the valued-added by Crane Construction?
A) $725,000 
B) $825,000 
C) $950,000 
D) $1,050,000

Quizplus · Accepted Answer

Crane Construction's value-added is the difference between the value of the building it produces and the value of the inputs it uses. In this case, the inputs are the steel beams, which are valued at $725,000. The value of the building is $1,050,000. Therefore, Crane Construction's value-added is $1,050,000 - $725,000 = $325,000.

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