Value added is defined as:
A) the value of productivity gains that arise when a firm increases its capital-labor ratio.
B) the difference between the total cost of production of a product and the total revenues earned from the sale of the product.
C) the amount by which the value of a firm's final output exceeds the total value of the intermediate goods and services used to produce the good.
D) the cost savings that a firm enjoys when it reduces the cost of its resources by employing a more efficient production method.

Question

Quizplus · Accepted Answer

Value added is the amount by which the value of a firm's final output exceeds the total value of the intermediate goods and services used to produce the good. It reflects the contribution of a firm to the overall economy and is used as a measure of economic performance. Option A refers to productivity gains, option B refers to profit, and option D refers to cost savings, which are not the same as value added.

Value Added Is Defined As