After producing output, the entrepreneur sells the product in the market. The money that is earned in this way is called:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Revenue
The money the entrepreneur earns by selling the product is called revenue. Rent, interest and wages are paid out of it, and the rest is profit.
Option (1) Revenue — Correct. Revenue is the whole money earned from the sale.
Option (2) Interest — Incorrect. Interest is only the part of revenue paid to capital.
Option (3) Investment expenditure — Incorrect. Investment expenditure is spending on new machinery or factories that raises productive capacity.
Option (4) Profit — Incorrect. Profit is what is left of revenue after rent, interest and wages.
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.” |