In Shoetown, a rancher takes $0 worth of inputs and produces animal skins, which he sells to the tanner for

$400. The tanner then sells leather to the shoemaker for $700, and the shoemaker then sells $1200

worth of shoes. The value added from these transactions is

A) $ 800. B) $1000. C) $1200. D) $2300. E) $2500.

The value added from these transactions is $1200, option C

Explanation:

Initially the rancher took $0 worth of input and produced animal skin of $400, at that stage $400 was the value added.

Thereafter, the tanner brought $400 input and made output of $700, hence $300 has been added.

Finally, the shoemaker bought input for $700 and turned out shoes worth $1200, thereby adding $500.

From the foregoing, the total value added from the beginning to the end is $1200 ($400+$300+$500)