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?

In Case will require a less costly investment in labor, while Wrap It Up will require less capital in the long term.
In Case will require less capital in the long term, while Wrap It Up will require a less costly investment in labor.
In Case will require a more costly investment in land, while Wrap It Up will have higher inventory costs.
In Case will have higher inventory costs, while Wrap It Up will require a more costly investment in land.
Mark this and return

Answer 1

Answer: In Case will require a less costly investment in labor, while Wrap It Up will require less capital in the long term.

Explanation: In Case needs 2 employees (less labor) and $4,500 equipment (more capital), while Wrap It Up needs 5 employees (more labor) and only $2,500 equipment (less capital). Land costs are the same.