How can a firm have a negative valued added, as supposedly some state-owned businesses did in the former Soviet Union? What has to be true for value added to be negative?
What will be an ideal response?
A negative value added means that the cost of the intermediate goods exceeds the price of the final product produced using the intermediate goods. For value added to be negative, a firm would use its primary factors of production, such as labor and capital equipment, to produce a product from the intermediate goods that is less valuable than the intermediate goods themselves.
You might also like to view...
Describe the differences between tradeoffs and free lunches in terms of a PPF
What will be an ideal response?
In the United States, the death rate has been decreasing for a number of reasons. According to the book which is not a reason
a. Decrease in infant mortality b. Increase in life expectancy c. Out migration d. Declining rates of heart disease