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Consider an economy with three companies - Cotton Inc, Yarnie Co, and Shirts & Pants Co. Cotton Inc processes raw cotton and sells all of
Consider an economy with three companies - Cotton Inc, Yarnie Co, and Shirts & Pants Co. Cotton Inc processes raw cotton and sells all of its output to Yarnie Co for $1,000. Yarnie Co then turns cotton into thread, and sells all of their balls of thread to Shirts & Pants Co for $10 each. Shirts & Pants Co can use 1 ball of thread to make 1 shirt and that shirt can then be sold for $15, or they can use 2 balls of thread to make 1 pair of pants, and that pair of pants can then be sold for $30. Suppose that Shirts & Pants Co sells 200 pairs of pants and 200 shirts. Given this information and holding everything else constant, what is the value added by each firm? a. None of the other answers are correct b. Cotton Inc: $1,000; Yarnie Co: $5,000; Shirts & Pants Co: $2,000 c. Cotton Inc: SO; Yarnie Co: $6,000; Shirts & Pants Co: $9,000 d. Cotton Inc: $1,000; Yarnie Co: $5,000; Shirts & Pants Co: $9,000 e. Cotton Inc: $1,000; Yarnie Co: $5,000; Shirts & Pants Co: $3,000
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