If a firm hires labor for $6,000,pays rent of $2,000,buys raw materials for $10,000,earns profits of $800,and sells its output for $25,000,the firm's value added is

Question

Quizplus · Accepted Answer

Value added is the difference between the revenue generated from the sale of goods or services and the cost of inputs purchased from other businesses.

In this case, the firm's value added can be calculated as:

Revenue - Cost of Inputs from Other Businesses

= $25,000 - ($6,000 + $2,000 + $10,000)

= $25,000 - $18,000

= $7,000

Therefore, the firm's value added is $7,000, and the closest answer choice is C.

If a Firm Hires Labor for $6,000,pays Rent of $2,000,buys