If the value added of a firm is positive, will the firm necessarily have positive profits?
What will be an ideal response?
No. Value added equals the price of the firm's product minus the cost of intermediate goods. The intermediate goods are converted to the firm's profits by the application of such resources as labor, capital, and entrepreneurship. Profit is the difference between the total sales revenue and the opportunity cost of all the resources used to make the product.
You might also like to view...
If each voter pays taxes in proportion to her demand, then _____
a. the median voter's most preferred outcome will definitely occur b. the condition for economic efficiency is satisfied c. special interests will have no power d. political institutions are optimal
Economists recognize that because people have limited resources:
A. they will never be happy. B. our future is bleak. C. they have to make trade-offs. D. government intervention is necessary.