![]() ![]() ![]() The factor cost and market price does not include the taxes that are paid to the government since taxes are not directly involved in the production process and, therefore, are not a part of the direct production cost. Examples of such production costs include the cost of renting machines, purchasing machinery and land, paying salaries and wages, cost of obtaining capital, and the profit margins that are added by the entrepreneur (profits are the cost of entrepreneur). Factor cost refers to the cost of factors of production that is incurred by a firm when producing goods and services. Producers of goods and services incur a cost for using these factors of production. These inputs are commonly known as factors of production and include things such as land, labour, capital, and entrepreneurship. A number of inputs are required in the production process. ![]()
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