Question

What are royalties? Royalty income is usually received for allowing others to use rights to property. For example, royalties may be related to allowing others to use or sell copyrighted material such as books, plays, or extract natural resources from property. The amount of the royalty is often a ________.

1) fixed amount
2) percentage of sales
3) monthly payment
4) annual fee

Answer 1

Royalties are payments for the use of intellectual property or natural resources, usually calculated as a percentage of sales. They provide a stream of income to the owner, thus encouraging innovation and creative work. Option 2 is correct.

Step-by-step explanation:

Royalties are payments that individuals or companies receive in exchange for allowing their intellectual property or natural resources to be used or extracted by others. These payments are usually calculated as a percentage of sales from the use of the property, rather than a fixed amount, monthly payment, or annual fee.

In a market economy such as the United States, income can come from various sources including wages, salaries, commissions, and from owning assets like real estate or intellectual property. If you own intellectual property, such as copyrights for books, plays, music, or patents for inventions, you can earn royalties. This is a form of income which motivates innovation and creative works in the economy. For instance, a playwright receives royalties for each performance of their play, providing them with a stream of income as long as their work is in production.