A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the:

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Business

Yaka

23 January, 07:27

A firm incurs $400 to manufacture a television. In the market, customers are willing to pay a maximum of $600 for the television priced at $500. The difference of $200 ($600 minus $400) is the:

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Paulina Clark · Answer 1

D. Economic Value Created

Explanation:

Economic value created refers to the firm's or an organization's economic profits. It is the difference between between actual returns and cost of capital used. In this case, the difference between maximum amount consumers are willing to pay (600) and cost incurred in producing the television (400) is referred to as economic value created (200). It is the excess required return of shareholders. It results from perceived utilities gained in a transaction.