In Shoetown, a Rancher Takes $0 Worth of Inputs and Produces

question 60

Multiple Choice

In Shoetown, a rancher takes $0 worth of inputs and produces animal skins, which he sells to the tanner for $400. The tanner then sells leather to the shoemaker for $700, and the shoemaker then sells $1 200 worth of shoes. The value added by the tanner is

• A)$400.
• B)$1200.
• C)$0.
• D)$300.
• E)$500.

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Definitions:

Lower Opportunity Cost

A situation where choosing one option over another results in a lower forfeit of potential benefit from the other options.

Self-Sufficient

refers to the ability of an individual, community, or country to provide for all their needs independently, without external assistance.

Trading Partner

A country, organization, or entity with which a business or country conducts trade, sharing a mutual economic exchange.

Trade Price

The price at which goods or services are traded between parties, often wholesale prices between manufacturers and retailers.