Macroeconomics 1st Edition by Dean Karlan,Jonathan Morduch

Exercise 10

Imagine a painter is trying to determine the value she adds when she paints a picture. Assume that after spending $200 on materials, she sells one copy of her painting for $500. She then spends $50 to make 10 copies of her painting, each of which sells for $100. What is the value added of her painting? What if a company then spends $10 per copy to sell 100 more copies, each for $50? What is the value the painter adds then? If it's unknown how many copies the painting will sell in the future, can we today determine the value added? Why or why not?