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22 May, 16:30

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?

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  1. 22 May, 19:36
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    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
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