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Question

Difficulty: MediumFactors of Production and Their Rewards

Match each production participant or resource scenario on the left with its corresponding economic reward on the right.

  • A property owner who leases raw parcel land to a commercial farming firmRent
  • A factory technician receiving fixed monthly compensation for physical and mental workWages / Salaries
  • A financial institution earning returns on money provided for purchasing machineryInterest
  • A business founder bearing non-insurable risks and organizing other resourcesProfit

Answer

Leasing raw land matches with Rent; factory technician effort matches with Wages / Salaries; returns on financial capital match with Interest; and business risk-taking matches with Profit.
Each participant represents a distinct factor of production: land yields rent to property owners, labour yields wages to workers for services rendered, capital yields interest to lenders providing funding or equipment, and enterprise yields profit to business owners for organizing resources and bearing risk.

Step-by-Step Solution

1
Identify the factor of production embodied by each economic participant.
Property owner = Land; Technician = Labour; Financial institution providing capital = Capital; Business founder = Enterprise.
Correct factor identification depends on whether the resource is natural (land), human effort (labour), man-made/monetary (capital), or risk-bearing organization (enterprise).
2
Match each identified factor to its specific economic reward.
Land earns Rent, Labour earns Wages/Salaries, Capital earns Interest, and Enterprise earns Profit.
Standard economic theory assigns distinct rewards to each of the four classical factors of production.

Key Concept

Factors of Production and Their Rewards
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Topics

Factors of Production and Their Rewards

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