CMA Foundation · Fundamentals of Business Economics and Management · Means of Production
In economics, which factor of production is primarily responsible for organising the other factors, taking business decisions and bearing the risk of uncertain returns?
The entrepreneur is the factor of production that organises land, labour and capital, takes business decisions and bears the uncertainty of profit or loss. The other three factors are the resources being combined, and they earn rent, wages and interest rather than carrying the residual risk.
- ALand
- BLabour
- CCapital
- DEntrepreneurCorrect
Explanation
The entrepreneur combines land, labour and capital, makes key decisions and bears the uncertainty of the venture. Land, labour and capital are the factors that get organised; they do not themselves bear the residual risk of the business.
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