Which statement describes the Principle of Surplus Productivity?

• A. Net income flows to the land after costs are satisfied
• B. Net income goes to improvements only
• C. Net income is determined by market rents
• D. Net income is irrelevant to land value

Answer: (A)

Surplus productivity is the idea that land earns rent as the surplus remaining after all other inputs have been paid. In other words, after wages for labor, returns on capital, and costs of production are satisfied, the net income that remains is attributed to the land itself. That residual income is what farmers or landowners capture as rent, reflecting the land’s productive ability beyond the costs of using it.

So, the statement that net income flows to the land after costs are satisfied best captures this concept. The other options don’t fit: assigning net income only to improvements ignores land’s role and the residual nature of rent; saying net income is determined by market rents conflates price with the surplus itself; and claiming net income is irrelevant to land value contradicts the whole idea that land’s value comes from its capacity to generate that surplus.