If a firm bakes cookies and sells them for $1,000 while spending $100 on sugar,$150 on chocolate,$50 on other supplies,$300 on wages and $400 on rent,what is its value added?

Question

Quizplus · Accepted Answer

Value added is the difference between the revenue earned and the cost of inputs used in production. 
Revenue - (cost of sugar + cost of chocolate + cost of other supplies + wages + rent) 
= $1,000 - ($100 + $150 + $50 + $300 + $400) 
= $1,000 - $1,000 
= $0 
Therefore, the value added is $0. 
Option A, B, D, and E can be eliminated. The only option left is C, which states that the value added is $700, but it is not correct.

If a Firm Bakes Cookies and Sells Them for $1,000