Production activities that add value create which of the following?

• A. negative externalities
• B. deadweight loss
• C. economic surplus
• D. market failure

Answer: (C)

Verified step by step guidance

1. Understand the concept of 'value added' in production: it refers to the increase in worth of goods or services as a result of the production process.
2. Recall that when production activities add value, they contribute positively to the overall welfare of society by creating benefits that exceed costs.
3. Recognize that 'economic surplus' is the sum of consumer surplus and producer surplus, representing the net benefits to society from production and consumption.
4. Identify that negative externalities and deadweight loss represent inefficiencies or costs to society, which are not created by value-adding production activities.
5. Conclude that production activities that add value create economic surplus, as they increase total welfare without causing market failure.