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Any payment to a factor of production in excess... - JAMB Economics 1995 Question

Any payment to a factor of production in excess of what is necessary to keep that factor in its present employment is known as?

A
real income
B
profit
C
economic rent
D
real wage
Ask EduPadi AI for a Detailed Answer
Correct Option: C

The correct answer is economic rent. Economic rent is defined as any payment to a factor of production above its opportunity cost or what is necessary to keep that factor in its current use.

Here's why the other options are incorrect:

  • A. real income: Real income is income adjusted for inflation, reflecting the purchasing power of the income.
  • B. profit: Profit is the reward for entrepreneurship, representing the difference between revenue and costs.
  • D. real wage: Real wage is the wage adjusted for inflation, reflecting the purchasing power of the wage.
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