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In: Economics

Firms A –E are involved in the production of consumer goods. Stage of production Sales value...

Firms A –E are involved in the production of consumer goods. Stage of production Sales value of product Firm A 1,010 Firm B 2,850 Firm C 3,340 Firm D 5,210 Firm E 6,440 A, What is the total value added by all the firms in the production of this good ____________ B, What did each firms add separately in value Firm A ____________ Firm B ____________ Firm C ____________ Firm D ____________ Firm E ____________

Solutions

Expert Solution

(A)

Following is the given table -

Stage of Production Sales Value of Production
Firm A 1,010
Firm B 2,850
Firm C 3,340
Firm D 5,210
Firm E 6,440

Stages of production implies that Firm A sells its output to Firm B which in turn sells its output to Firm C which in turn sells its output to Firm D which sells its output to Firm E which sell to final consumers.

The total value added by all the firms in production of this good would be equal to the amount of final sales to the consumers.

The final sales is made by Firm E. The value of sales by Firm E is 6,440.

So,

The total value added by all the firms in the production of this good is 6,440

(B)

Firm A has not purchased anything from anyone. So, its value added would be equal to its sale value.

So,

The value added by Firm A is 1,010.

Calculate the value added by Firm B -

Value added = Sales value of production of Firm B - Sales value of production of Firm A

Value added = 2,850 - 1,010 = 1,840

So,

The value added by Firm B is 1,840.

Calculate the value added by Firm C -

Value added = Sales value of production of Firm C - Sales value of production of Firm B

Value added = 3,340 - 2,850 = 490

So,

The value added by Firm C is 490.

Calculate the value added by Firm D -

Value added = Sales value of production of Firm D - Sales value of production of Firm C

Value added = 5,210 - 3,340 = 1,870

So,

The value added by Firm D is 1,870.

Calculate the value added by Firm E -

Value added = Sales value of production of Firm E - Sales value of production of Firm D

Value added = 6,440 - 5,210 = 1,230

So,

The value added by Firm E is 1,230.

Rahul Sunny answered 2 years ago
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