The value added of an item produced refers to:
A) a firm's profits on the item sold.
B) the value of the labor inputs in the production of an item.
C) the value of a firm's output less the value of its costs.
D) the value of a firm's output less the value of the intermediate goods that the firm purchases.

Question

Quizplus · Accepted Answer

The value added of an item produced is calculated by subtracting the value of intermediate goods used in the production process from the value of the firm's output. It is the amount of value added by a firm to the intermediate goods it purchases. This is not equal to the firm's profits on the item sold (A) or the value of labor inputs (B). While value added is related to costs, it specifically refers to the value added by the firm, not just the total value of output minus costs (C).

The Value Added of an Item Produced Refers To