Agree or disagree. Correct wrong statements

TEXT 3. CAPITAL

Economic analyses traditionally divides factors of production into three categories: labour, land and capital. The first two of these are called primary or original factors of production available before production takes place. To them we add a produced factor of production, capital or capital goods.

Capital consists of those durable produced goods that are in turn used as productive inputs for further production. Some capital goods might last a few years while others might last for a century or more. But the essential property of capital good is that it is both an input and an output.

There are three main categories of capital goods: structures (such as factories and homes), equipment (consumer durable goods like automobiles and producer’s durable equipment like machine tools) and inventories (such as cars in dealers’ lots).

Originally capital appears in a monetary form. The function of money capital is to create necessary conditions for production of material welfare. The next form is production capital. Its function is rational use of factors of production and manufacture of goods possessing value. The third form is trade capital whose function is in selling finished goods thus converting of trade capital into money. At this stage realized surplus value is converted into profit of an entrepreneur.

One of the most important tasks of any economy, business or household is to allocate its capital across different possible investments.

In deciding upon the best investment, we need a measure for that yield or return on capital. One important measure is the rate of return on capital, which denotes the net dollar return per year for every dollar of invested capital.

One useful approach is to compare the rates of return on capital of the different investments.

1. Economists divide factors of production into three categories.

2. Land is a primary factor of production.

3. Original factors are available after production takes place.

4. Durable goods are used as productive inputs for further production.

5. There are three main categories of capital goods: structures, equipment and inventories.

6. The function of money capital is rational use of factors of production and manufacture of goods possessing value.

7. Realized surplus value is converted into profit of an entrepreneur at the stage of converting trade capital into money.

8. The most important task of any economy is to allocate its capital across different possible investments.

9. The rate of return on capital denotes the net dollar return per year.

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