CMA Foundation · Fundamentals of Business Economics and Management · Means of Production
In the classification of factors of production, which factor is rewarded with 'profit' and is the one that organises the other factors and bears the uncertainty of the business?
The entrepreneur is the factor rewarded with profit. The entrepreneur organises land, labour and capital and bears the uncertainty of the business, so what remains after paying rent, wages and interest is profit, which may also turn into a loss.
- ALand
- BLabour
- CCapital
- DEntrepreneurCorrect
Explanation
Land earns rent, labour earns wages and capital earns interest. The entrepreneur combines these factors and bears uncertainty, so the reward is profit, which is a residual and can even be negative.
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