In Shoetown, a rancher takes $0 worth of inputs and produces animal skins, which he sells to the tanner for $400. The tanner then sells leather to the shoemaker for $700, and the shoemaker then sells $1 200 worth of shoes. The value added by the tanner is

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Quizplus · Accepted Answer

The value added by a business is the difference between its revenue and the cost of its intermediate inputs. The tanner's revenue is $700 from selling leather to the shoemaker, and the cost of its intermediate input (animal skins) from the rancher is $400. Therefore, the value added by the tanner is $700 - $400 = $300.

In Shoetown, a Rancher Takes $0 Worth of Inputs and Produces