Essays on Economic Value Added: The Invisible Hand at Work Assignment

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The paper "Economic Value Added: The Invisible Hand at Work" is a great example of an assignment on macro and microeconomics. Question 1: A firm X is trying to calculate the overall added value of its product aimed at assessing its economic viability. Which of the following contexts explain how the value-added will be calculated in company X? It is the NOPAT (net operating profit after tax) less a dollar cost of capital charge It is the overall variation between the book value of equity and the market value of the firm It is the difference between what the consumer in the market is willing to pay for the product and the cost of the product None of the above The value-added calculation is a major maze that confronts many students and this spills over when they are appointed in various organizations.

They fail to grasp the general utility of value-added in the eventual selling price of the final product reaching the consumer relative to the cost of the product. Against this background, the calculation of value added is embedded in the definition of the term. Durant (1999) perceived value-added in economics to mean the net operating profit after the overall cost of capital and taxes.

In this regard, the prudent procedure of calculating the value-added of the product in the firm X will be through the precise calculation of the overall cost of producing the product subtracted from the cost of the product in the market. For instance, if the cost of producing that particular product is $10 and the product is selling at $15 in the market, then the total value added of that product in the firm X can be perceived to be $5. Question 2:Which of the following does not constitute factors of production? Entrepreneurship Capital Land Labour None of the above There have been major discourses on what constitutes factors of production in any given firm among economists.

Some have alluded that the only land, capital, and labor are the only traditionally accepted factors of production and their feasibility stands to date, Nonetheless, another school has proposed the inclusion of entrepreneurship in this list on an equal measure.

References

Durant, M. (1999). Economic Value Added: The Invisible Hand at Work. Westminster: Credit

Research Foundation.

Evans, E. (2005). Marginal Analysis: An Economic Procedure for Selecting Alternative

Technologies/Practices. Gainesville: University of Florida.

Kendal, W.R. &Scott, C.R. (1990). Information as a Factor of Production. Journal of

Information Technology management, 1(2), 39-43.

Makinen, G. (2003). Inflation: Causes, Costs, and Current Status. Retrieved May 07, 2012 from

http://www.policyalmanac.org/economic/archive/inflation.pdf.

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