Question 24 A firm purchases \( \$ 400,000 \) worth of raw materials and pays wages and salaries of \( \$ 300,000 \) and divid firm sells its output for \( \$ 1 \) million, the firm's value added to GDP is (1) \( \$ 1,000,000 \). (2) \( \$ 400,000 \). (3) \( \$ 800,000 \). (4) \( \$ 600,000 \).

To find the value added to GDP, you subtract the cost of the raw materials from the firm's total sales. In this scenario, the firm sells its products for \( \$ 1,000,000 \) and incurs \( \$ 400,000 \) in raw materials costs. The calculation would be: \[ \text{Value Added} = \text{Total Sales} - \text{Cost of Raw Materials} = 1,000,000 - 400,000 = 600,000. \] Thus, the firm's value added to GDP is \( \$ 600,000 \). This approach captures the total economic contribution of the firm, focusing on the value that it creates through its operations rather than merely accounting for sales figures or costs alone. It reflects how input costs transform into economic output, highlighting the significance of each step in the value chain in contributing to the overall economy.