Suppose a firm buys $3000 worth of inputs from other firms,hires $2000 worth of labour services,and has sales revenue of $7500.The firm's resulting profit is $2500.If the GST (a value-added tax)rate is 5%,this firm will pay ________ in GST.
A)$0
B)$125
C)$225
D)$375
E)$2500

Question

Quizplus · Accepted Answer

To find the amount of GST paid by the firm, we first need to calculate the value-added by the firm. Value-added is the difference between sales revenue and cost of inputs purchased from other firms.

Value-added = Sales Revenue - Cost of Inputs
Value-added = $7500 - $3000
Value-added = $4500

The GST paid is then calculated as a percentage of the value-added. Since the GST rate is 5%, the amount of GST paid is:

GST paid = 5% of Value-added
GST paid = 5% of $4500
GST paid = $225

Therefore, the firm will pay $225 in GST. The correct choice is (C).

Suppose a Firm Buys $3000 Worth of Inputs from Other