Which of the following best describes factors of production in microeconomics?

• A. They are the final goods and services produced by a firm.
• B. They are the taxes paid by a firm to the government.
• C. They are the profits earned by a firm from selling its products.
• D. They are economic resources owned by a firm, such as land, labor, capital, and entrepreneurship.

Answer: (D)

Verified step by step guidance

1. Understand that factors of production refer to the inputs used in the production process to create goods and services.
2. Recognize the four main categories of factors of production: land (natural resources), labor (human effort), capital (machinery, tools, buildings), and entrepreneurship (the ability to organize and take risks).
3. Note that factors of production are economic resources owned or controlled by a firm or individual that contribute to producing output.
4. Distinguish factors of production from other economic concepts such as final goods and services (outputs), taxes (government levies), and profits (financial gains).
5. Conclude that the best description of factors of production is that they are economic resources owned by a firm, such as land, labor, capital, and entrepreneurship.