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If firms use capital services, what type of payment will they make?

Answer and explanation

Correct answer: Interest

Capital is a factor of production used by firms to produce goods and services. In the standard factor-income classification, the payment for the use of capital is interest. Wages are paid for labour and rent for land. A dividend is a distribution of company profit to shareholders, not the standard factor reward for capital services in this question. Therefore, option B is correct.

Related tags

National IncomeCircular FlowCapital InterestFactor PaymentsGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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