Practice question · Sort into groups
Sort each item: is it an intermediate input the firm buys, or value the firm adds?
Groups: Intermediate input · Value added by the firm
- Packaging bought wholesale
- Flour bought from the mill
- The brand customers trust
- The baker’s kneading skill
- Electricity from the grid
- The recipe perfected in-house
Hints
- Ask whether the item was bought ready-made from another firm.
- What the firm contributes is the transformation, not the purchase.
Show the answer
Intermediate input: Flour bought from the mill, Electricity from the grid, Packaging bought wholesale
Value added by the firm: The baker’s kneading skill, The recipe perfected in-house, The brand customers trust
Why
Everything purchased from other firms is an intermediate input; skill, know-how, and reputation are how the firm transforms those inputs into something worth more.
Practise Concept of the Firm
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