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.
Frequently asked questions
What is the correct answer to this question?
Interest
Why is this the correct answer?
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.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
