Question

Select the correct option describing the two statements given below.

Assertion(A): Profits are rewards received by organisations.

Reason(R): This is because profits are generated when the production of the product uses lesser capital than the sale of the product.

• A. Both A and R are false.
• B. Both A and R are true and R is the correct explanation of A.
• C. Both A and R are true but R is not the correct explanation of A.
• D. A is true but R is false.

Answer 1

The correct option is B Both A and R are true and R is the correct explanation of A.

Profits are the extra capital earned by an organisation when the capital used for production is lesser than the capital generated through the selling of the product. It is a reward for the organisation for organising the other three factors of production. A profit can be generated when the three factors are being used to produce the right product which satisfies human wants.