Question

What kind of goods does a firm consume during the process of production?

• A. Raw material
• B. Intermediate goods
• C. Final goods
• D. Both (A) and (B)

Hint:

Firms consume raw materials and intermediate goods in the production process, but final goods are the end products.

Answer 1

The Correct Option is D

Step 1: Understanding production goods.
In the process of production, firms use various types of goods to create finished products. These goods can be divided into raw materials and intermediate goods. Raw materials are the basic inputs, while intermediate goods are used in the production process but are not the final product. Both are consumed by firms in production.

Step 2: Analyzing the options.
(A) Raw material: Raw materials are essential inputs for production, but firms also use intermediate goods in the process.
(B) Intermediate goods: Intermediate goods are goods that are used in the production process to create final goods. Firms do consume these goods during production.
(C) Final goods: Incorrect. Final goods are the end products sold to consumers and are not used in the production process.
(D) Both (A) and (B): Correct. Firms use both raw materials and intermediate goods during the production process.

Step 3: Conclusion.
Firms consume both raw materials and intermediate goods during the production process. Thus, the correct answer is (D).