If households receive wages and rent in an example, how will these payments be viewed by firms?
Answer and explanation
Correct answer: Production costs
Wages and rent are factor incomes for households because households supply labour and land or property services. From the firms’ perspective, the same payments are expenses incurred to obtain and use these factors in production. Therefore, wages and rent are included in firms’ production costs. They are not household consumption expenditure, import payments or government grants. Hence, option A is correct.
Frequently asked questions
What is the correct answer to this question?
Production costs
Why is this the correct answer?
Wages and rent are factor incomes for households because households supply labour and land or property services. From the firms’ perspective, the same payments are expenses incurred to obtain and use these factors in production. Therefore, wages and rent are included in firms’ production costs. They are not household consumption expenditure, import payments or government grants. Hence, option A 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.
