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28 May, 03:51

Suppose that businesses buy a total of $120 billion of the four resources (labor, land, capital, and entrepreneurial ability) from households. if households receive $68 billion in wages, $14 billion in rent, and $24 billion in interest, how much are households paid for providing entrepreneurial ability?

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  1. 28 May, 05:28
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    To consider this question, we must consider the relationship between the resources and their costs.

    Labor: The price that companies pay for labor is the wage. The businesses paid $68 billion for labor

    Land: The price of land that business pay is rent (assuming they do not own the land). The business paid $14 billion for land.

    Capital: The cost of using capital is the interest paid on that capital. The businesses paid $24 billion for using capital.

    This leaves entrepreneurial ability. It is more difficult to discern the payment for this resource, as it is less tangible and thus has a less direct cost. From the payment for other resources and the total payment to households, we can infer the payment for entrepreneurial ability:

    120 - 68 - 14 - 24 = $14 Billion
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