Question on: JAMB Economics - 1995
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
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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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