Economic value creation is calculated as:

• A. The total revenue earned by a firm
• B. The market price minus the equilibrium quantity
• C. The sum of all costs incurred by a firm
• D. The difference between a consumer's willingness to pay and the cost of production

Answer: (D)

Verified step by step guidance

1. Understand the concept of economic value creation: it represents the net benefit generated by a firm, which is the difference between what consumers are willing to pay and the cost to produce the good or service.
2. Recall that total revenue is the amount a firm earns from selling its product, calculated as \(\text{Price} \times \text{Quantity}\), but this alone does not measure value creation.
3. Recognize that the market price minus equilibrium quantity is not a meaningful economic measure, as it mixes units and values incorrectly.
4. Know that the sum of all costs incurred by a firm represents the total cost, which is part of the calculation but not the value creation itself.
5. Conclude that economic value creation is best described as the difference between a consumer's willingness to pay (which reflects the value to the consumer) and the cost of production (which reflects the firm's expense), capturing the net benefit to society.