Osion Electronics Inc.incurs a cost of $350 to produce one unit of a cell phone.The company's management has priced the product at $600 in the market.Considering the technological advancement of the cell phone,customers perceive its value to be around $800.What is the economic value created in this scenario?
A) $350
B) $450
C) $800
D) $200

Question

Quizplus · Accepted Answer

Economic value creation equals consumer surplus plus firm profit, or the sum of consumer and producer surplus. In this case, the economic value created is ($800 - $600) + ($600 - $350) = $450.