Firm A produces something that Firm B uses as an input. The product of Firm B, in turn, is purchased and used as an input by Firm C, and so on down the line through Firm E, which produces the end product. The total value added by Firms A-E from the production of the end product described here is:

Question

Quizplus · Accepted Answer

The calculation of the total value added is as follows:
Firm A: Let's assume they add $500 value to the product.
Firm B: Uses input from Firm A and adds $200 value to the product. So, the total value becomes $700.
Firm C: Uses input from Firm B and adds $400 value to the product. So, the total value becomes $1,100.
Firm D: Uses input from Firm C and adds $1,900 value to the product. So, the total value becomes $3,000.
Firm E:Uses input from Firm D and adds $800 value to the product. So, the total value becomes $3,800.
Therefore, the total value added by firms A-E is $3,800.

Firm a Produces Something That Firm B Uses as an Input