The wages, interest, profits and rents paid out by a firm must add up to the firm's:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Value added
A firm’s value added is shared among its four factors of production. So wages, interest, profits and rents together equal the value added.
NCERT (2026-27): “2.2.1 The Product or Value Added Method … The term that is used to denote the net contribution made by a firm is called its value added. We have seen that the raw materials that a firm buys from another firm which are completely used up in the process of production are called ‘intermediate goods’. Therefore the value added of a firm is, value of production of the firm – value of intermediate goods used by the firm. The value added of a firm is distributed among its four factors of production, namely, labour, capital, entrepreneurship and land. Therefore wages, interest, profits and rents paid out by the firm must add up to the value added of the firm. …” |