The reward for capital is___________

Step 1: Analyze the question The question asks which payment is the reward (return) for the factor of production called capital.

Step 2: Explain the concept In Economics, each factor of production earns its own reward:

| Factor of Production | Reward | |---|---| | Land | Rent | | Labour | Wages/Salaries | | Capital | Interest | | Entrepreneur | Profit |

Capital here means man-made goods used to produce other goods (machines, tools, factories, money used for investment). The owner of capital gives it up for production, so they are paid interest for its use.

Step 3: Work through the options

• A. Interest: This is the payment for the use of capital. Correct.
• B. Rent: This is the reward for land, not capital.
• C. Risk: This is not a reward. Risk-bearing is linked to the entrepreneur, whose reward is profit.
• D. Premium: This usually refers to an insurance payment or an extra amount paid on something. It is not the reward for capital.

Step 4: Answer The reward for capital is Interest, which is option A.

Exam tip: Remember "LLCE → R W I P": Land-Rent, Labour-Wages, Capital-Interest, Entrepreneur-Profit. It will help you answer many factor-reward questions quickly in JAMB, WASSCE and NECO.