Question
Read the factors of production for two businesses: In Case manufactures cases for smart phones, while Wrap It Up is a gift-wrapping service.
In Case
• $1,500 a month for rented building
• Will need two new employees
• $2,000 for inventory expenses
• $4,500 for equipment expenses
Wrap It Up
• $1,500 a month for a rented store
• Will need five new employees
• $1,500 for inventory expenses
• $2,500 for equipment expenses
Which statement correctly compares the two businesses?
A: In Case will require a less costly investment in labor, while Wrap It Up will require less capital in the long term.
B: In Case will require less capital in the long term, while Wrap It Up will require a less costly investment in labor.
C: In Case will require a more costly investment in land, while Wrap It Up will have higher inventory costs.
D: In Case will have higher inventory costs, while Wrap It Up will require a more costly investment in land.
In Case
• $1,500 a month for rented building
• Will need two new employees
• $2,000 for inventory expenses
• $4,500 for equipment expenses
Wrap It Up
• $1,500 a month for a rented store
• Will need five new employees
• $1,500 for inventory expenses
• $2,500 for equipment expenses
Which statement correctly compares the two businesses?
A: In Case will require a less costly investment in labor, while Wrap It Up will require less capital in the long term.
B: In Case will require less capital in the long term, while Wrap It Up will require a less costly investment in labor.
C: In Case will require a more costly investment in land, while Wrap It Up will have higher inventory costs.
D: In Case will have higher inventory costs, while Wrap It Up will require a more costly investment in land.
Answers
GPT-4o mini
Let's break down the factors of production for each business to compare them:
**In Case**:
- Rented building (land): $1,500 a month
- Employees (labor): 2 new employees needed
- Inventory: $2,000
- Equipment: $4,500
**Wrap It Up**:
- Rented store (land): $1,500 a month
- Employees (labor): 5 new employees needed
- Inventory: $1,500
- Equipment: $2,500
Now let's analyze the statements:
A: **In Case will require a less costly investment in labor, while Wrap It Up will require less capital in the long term.**
- This is true; In Case requires 2 employees (less costly in labor), while Wrap It Up needs 5 employees (more costly). However, Wrap It Up has lower costs for inventory and equipment than In Case.
B: **In Case will require less capital in the long term, while Wrap It Up will require a less costly investment in labor.**
- This is false; In Case has higher equipment and inventory costs which indicates a higher capital requirement than Wrap It Up.
C: **In Case will require a more costly investment in land, while Wrap It Up will have higher inventory costs.**
- False; both businesses have the same monthly rent for the building/store, and In Case has higher inventory costs ($2,000 vs. $1,500).
D: **In Case will have higher inventory costs, while Wrap It Up will require a more costly investment in land.**
- This is also false; In Case has higher inventory costs ($2,000 vs. $1,500), but both pay the same amount ($1,500) for rent.
Given this analysis, **option A** is the correct statement because it accurately reflects that In Case will require a less costly investment in labor while Wrap It Up will have lower inventory and equipment costs in the long term.
**In Case**:
- Rented building (land): $1,500 a month
- Employees (labor): 2 new employees needed
- Inventory: $2,000
- Equipment: $4,500
**Wrap It Up**:
- Rented store (land): $1,500 a month
- Employees (labor): 5 new employees needed
- Inventory: $1,500
- Equipment: $2,500
Now let's analyze the statements:
A: **In Case will require a less costly investment in labor, while Wrap It Up will require less capital in the long term.**
- This is true; In Case requires 2 employees (less costly in labor), while Wrap It Up needs 5 employees (more costly). However, Wrap It Up has lower costs for inventory and equipment than In Case.
B: **In Case will require less capital in the long term, while Wrap It Up will require a less costly investment in labor.**
- This is false; In Case has higher equipment and inventory costs which indicates a higher capital requirement than Wrap It Up.
C: **In Case will require a more costly investment in land, while Wrap It Up will have higher inventory costs.**
- False; both businesses have the same monthly rent for the building/store, and In Case has higher inventory costs ($2,000 vs. $1,500).
D: **In Case will have higher inventory costs, while Wrap It Up will require a more costly investment in land.**
- This is also false; In Case has higher inventory costs ($2,000 vs. $1,500), but both pay the same amount ($1,500) for rent.
Given this analysis, **option A** is the correct statement because it accurately reflects that In Case will require a less costly investment in labor while Wrap It Up will have lower inventory and equipment costs in the long term.