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Question

Difficulty: MediumFactors of Production and Their Rewards

In commercial operations, distinct productive contributions receive specific economic rewards. Match each business contribution listed on the left with its corresponding factor of production and economic reward on the right.

  • An automated packaging machine purchased to streamline warehouse operationsCapital — rewarded by Interest
  • A plot of commercial real estate leased to establish a distribution hubLand — rewarded by Rent
  • A business founder who commits personal funds and assumes ultimate operational risksEnterprise — rewarded by Profit
  • A certified auditor performing financial reviews for a contractual monthly feeLabour — rewarded by Wages or Salaries

Answer

Packaging machine matches Capital (Interest); Commercial real estate plot matches Land (Rent); Risk-bearing founder matches Enterprise (Profit); Certified auditor matches Labour (Wages/Salaries).
Each business input correctly aligns with its economic definition: man-made machinery represents Capital (Interest), real estate ground space represents Land (Rent), entrepreneurial risk-bearing represents Enterprise (Profit), and professional human effort represents Labour (Wages/Salaries).

Step-by-Step Solution

1
Identify the factor of production and reward for physical man-made tools.
The automated packaging machine is a man-made instrument of production (Capital), earning Interest.
Capital encompasses durable equipment created to aid further goods production.
2
Identify the factor of production and reward for natural/geographical site usage.
The leased commercial real estate plot represents natural space (Land), earning Rent.
Land covers all natural resources and physical space whose supply is fixed, earning rent.
3
Identify the factor of production and reward for risk-taking and business organization.
The founder coordinating operations and bearing financial risk is Enterprise, earning Profit.
Enterprise coordinates other factors and undertakes uninsurable risks in anticipation of residual profit.
4
Identify the factor of production and reward for human service provision.
The auditor providing professional analytical services for contractual payment is Labour, earning Salaries.
Labour covers human effort (mental or physical) exerted for economic remuneration.

Key Concept

Factors of Production and Their Rewards
Estimated Time:1m 30s
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Topics

Factors of Production and Their Rewards

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