The "Value Added" for an Individual Firm Can Be Calculated

question 113

Multiple Choice

The "value added" for an individual firm can be calculated by

• A)adding the cost of the intermediate goods used by the firm.
• B)subtracting the payments made to the factors of production used by the firm from the firm's revenue.
• C)calculating the revenue generated by the firm.
• D)calculating the profit generated by the firm.
• E)adding up the payments made to the factors of production used by the firm.

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Definitions:

Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life.

Fixed Costs

Business expenses that remain constant regardless of changes in production volume, such as rent, salaries, and loan repayments.

Variable Cost

Costs that vary in direct proportion to changes in the level of production or sales.

Fixed Costs

Expenses that do not change in proportion to the activity of a business, such as rent, salaries, and equipment leases.