Question

Households receive a total income of $5 million. Of this, $3.5 million are wages received for laborservices, $1 million are rental payments, and $250,000 are interest payments received. What arethe costs of production and profits equal to respectively?

Answer 1

Answer:

profit = 250,000

Explanation:

Factor Income is derived from the sum of the Factor of Production

Labor, Land, Capital and Enterprise

Income = wages + rent + interest + profit

To get profit, which is the retribution for the entrepreneur we post our know values and solve for p.

5,000,000 = 3,500,000 wages + 1,000,000 rent + 250,000 interest + p

5,000,000 - 3,500,000 - 1,000,000 - 250,000 = p

p = 250,000