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Difficulty: EasyFactors of Production and Their Rewards

Which of the following represents the economic reward accrued to capital for its contribution to the production process?

  1. InterestAnswer
  2. B
    Rent
  3. C
    Wages
  4. D
    Profit

Answer

Interest
Interest is the economic reward paid for the use of capital in productive activities.

Step-by-Step Solution

1
Identify the target factor of production mentioned in the question.
The target factor is capital, which refers to man-made assets such as machinery, tools, equipment, and money used in business operations.
Recognizing the definition of the factor helps identify its corresponding financial reward.
2
Match the factor of production to its economic return.
Capital yields interest as compensation to investors or lenders for allocating funds and assets to productive ventures.
In economic and commercial terms, each factor has a distinct reward: Land earns Rent, Labour earns Wages, Capital earns Interest, and Enterprise earns Profit.

Key Concept

Factors of Production and Their Rewards
Estimated Time:45s
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Topics

Factors of Production and Their Rewards

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