Question

Consider the following data on a firm that makes and sells pieces of pottery. The firm...

Consider the following data on a firm that makes and sells pieces of pottery. The firm already has a pottery wheel and sculpting tools but needs to rent an office space and a pottery kiln.

Revenue $2000
Costs
Rental Fee For Office Space

$600

Rental Fee For Kiln

 $200

Clay

 $100

Paint Materials

 $100
Wages $600

(a) Calculate the value added by this firm. (Hint: what are the intermediate goods?)

(b) Show that value added equals capital income plus the labor income paid by the pottery firm. (Hint: what comprises capital income?)

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