In Lumberville,the lumberjack cuts trees and sells them to the local mill for $500.The local mill processes these trees into wood planks and sells them to the carpenter for $800.Finally,the carpenter uses these wood planks to make tables which he sells for $1400 to Lumberville's residents.If we allowed double counting,the total value of Lumberville's output would be calculated as ________.But if we correctly compute the total value added,the value of the total output in Lumberville would be ________.

Question

Quizplus · Accepted Answer

Double counting includes the value of intermediate goods, so $500 (lumberjack) + $800 (mill) + $1400 (carpenter) = $2700. Correctly computing value added involves only counting the final value of goods, which is $1400 for the tables sold by the carpenter.

In Lumberville,the Lumberjack Cuts Trees and Sells Them to the Local