Arrange the following in the order in which they happen in a capitalist firm, as described in NCERT:
(A) Part of the revenue is paid out as rent, interest and wages, and the rest is profit
(B) The entrepreneur hires wage labour and the services of capital and land
(C) Profits are used in the next period to buy new machinery or build new factories
(D) The output is sold in the market and revenue is earned
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → (B), (D), (A), (C)
(B) The entrepreneur hires wage labour and the services of capital and land — The inputs come first; production starts only after hiring them.
(D) The output is sold in the market and revenue is earned — The product is sold and the money earned is revenue.
(A) Part of the revenue is paid out as rent, interest and wages, and the rest is profit — Revenue is shared among land, capital and labour; what is left is profit.
(C) Profits are used in the next period to buy new machinery or build new factories — This happens in the next period, after profit is earned.
NCERT (2026-27): “1.2 Context of the Present Book of Macroeconomics … After producing output with the help of these three factors of production, namely capital, land and labour, the entrepreneur sells the product in the market. The money that is earned is called revenue. Part of the revenue is paid out as rent for the service rendered by land, part of it is paid to capital as interest and part of it goes to labour as wages. The rest of the revenue is the earning of the entrepreneurs and it is called profit. Profits are often used by the producers in the next period to buy new machinery or to build new factories, so that production can be expanded. These expenses which raise productive capacity are examples of investment expenditure.” “… In a firm the entrepreneur (or entrepreneurs) is at the helm of affairs. She hires wage labour from the market, she employs the services of capital and land as well. After hiring these inputs she undertakes the task of production. …” |