If a firm hires labor for $20,000,pays rent of $12,000,buys raw materials for $6,000 from another firm,earns profits of $3,000,and sells its output for $41,000,the value added by the firm is _____.

Question

Quizplus · Accepted Answer

The value added by the firm is calculated as the difference between its sales and the cost of goods or services bought from other firms. Here, it's $41,000 (sales) - $6,000 (cost of raw materials from another firm) = $35,000. The costs of labor and rent are part of the firm's value-added, not deductions from it.

If a Firm Hires Labor for $20,000,pays Rent of $12,000,buys