With reference to the factors of production in a capitalist enterprise, consider the following statements: 1. The money earned by selling the product is called investment. 2. The part of revenue paid for the service rendered by land is called rent. 3. The earnings of the entrepreneur are called profit. Which of the statements given above is/are correct?

Correct Option The correct option is 2 and 3 only. Explanation In a capitalist economy, production involves the transformation of inputs into outputs. These inputs are classified into four primary factors of production: Land, Labour, Capital, and Entrepreneurship. Each factor receives a specific return or payment for its contribution to the production process. Statement-wise Analysis - Statement 1 is Incorrect. The money earned by an enterprise by selling its product is known as Revenue (calculated as Price × Quantity). Investment refers to the expenditure incurred on acquiring capital goods (such as machinery or infrastructure) to facilitate production. - Statement 2 is Correct. Land encompasses all natural resources used in production. The specific factor payment made for the services rendered by land is termed Rent. - Statement 3 is Correct. The entrepreneur organizes the other factors of production (Land, Labour, and Capital) and bears the risks associated with the enterprise. The reward for this risk-taking and organizational role is Profit. Key Takeaway Key Takeaway: The four factors of production correspond to specific factor payments: - Land: Rent - Labour: Wages - Capital: Interest - Entrepreneurship: Profit

NCERT Class 12 Economics — Chapter 3: Introduction to Macroeconomics and its Concepts

mcqeasy

With reference to the factors of production in a capitalist enterprise, consider the following statements:

The money earned by selling the product is called investment.
The part of revenue paid for the service rendered by land is called rent.
The earnings of the entrepreneur are called profit.

Which of the statements given above is/are correct?

Official previous-year question

Verified 1 Aug 2026.

Options

A1 and 2 only
B1, 2 and 3
C2 only
D2 and 3 only

Did you get this right?

Solution

Correct Option

The correct option is 2 and 3 only.

Explanation

In a capitalist economy, production involves the transformation of inputs into outputs. These inputs are classified into four primary factors of production: Land, Labour, Capital, and Entrepreneurship. Each factor receives a specific return or payment for its contribution to the production process.

Statement-wise Analysis

Statement 1 is Incorrect. The money earned by an enterprise by selling its product is known as Revenue (calculated as Price × Quantity). Investment refers to the expenditure incurred on acquiring capital goods (such as machinery or infrastructure) to facilitate production.
Statement 2 is Correct. Land encompasses all natural resources used in production. The specific factor payment made for the services rendered by land is termed Rent.
Statement 3 is Correct. The entrepreneur organizes the other factors of production (Land, Labour, and Capital) and bears the risks associated with the enterprise. The reward for this risk-taking and organizational role is Profit.

Key Takeaway

Key Takeaway: The four factors of production correspond to specific factor payments:

Land: Rent
Labour: Wages
Capital: Interest
Entrepreneurship: Profit

Your note

More from Chapter 3: Introduction to Macroeconomics and its Concepts

The standard analysis of a capitalist economy is often inapplicable to many tribal societies primarily because:

medium

Consider the following statements regarding the ‘Household Sector’: 1. Households can earn rent by leasing land. 2. Households are prohibited from lending capital to earn interest. 3. Households provide the demand for the products sold by firms. Which of the statements given above is/are correct?

easy

Consider the following statements regarding the distinction between microeconomics and macroeconomics: 1. Microeconomics studies the behavior of individual economic agents who always act in the interest of the country as a whole. 2. Macroeconomics deals with aggregate economic variables and the interlinkages between different sectors of an economy. 3. In microeconomics, the ‘macro’ phenomena like inflation or unemployment are usually taken as given. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the ‘Great Depression of 1929’: 1. It led to a sharp decline in the demand for goods in North American markets. 2. The unemployment rate in the USA remained constant at 3 % between 1929 and 1933. 3. It provided the context for the emergence of macroeconomics as a separate subject. Which of the statements given above is/are correct?

medium

Consider the following statements regarding the aggregation in macroeconomics: 1. The price level of the representative good is unrelated to the general price level of the economy. 2. Macroeconomics often simplifies analysis by focusing on a single representative good. 3. This simplification captures all distinctive characteristics of individual goods, such as the difference between agricultural and industrial production conditions. Which of the statements given above is/are correct?

medium

Keep practising Chapter 3: Introduction to Macroeconomics and its Concepts

Work through every question from this NCERT chapter.

Browse all NCERT Class 12 Economics chapters

Correct Option

The correct option is 2 and 3 only.

Explanation

Statement-wise Analysis

Statement 1 is Incorrect. The money earned by an enterprise by selling its product is known as Revenue (calculated as Price × Quantity). Investment refers to the expenditure incurred on acquiring capital goods (such as machinery or infrastructure) to facilitate production.
Statement 2 is Correct. Land encompasses all natural resources used in production. The specific factor payment made for the services rendered by land is termed Rent.
Statement 3 is Correct. The entrepreneur organizes the other factors of production (Land, Labour, and Capital) and bears the risks associated with the enterprise. The reward for this risk-taking and organizational role is Profit.

Key Takeaway

Key Takeaway: The four factors of production correspond to specific factor payments:

Land: Rent
Labour: Wages
Capital: Interest
Entrepreneurship: Profit