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?

Answer 1

The correct answer is In Case will require a less costly investment in labor, while Wrap It Up will require less capital in the long term.

Step-by-step explanation:

Explanation: They are comparing different things but in the same purpose. Which actually makes the comparison valid and correct.

Answer 2

In case is relatively more capital intensive & Wrap it up relatively more labour intensive.

Step-by-step explanation:

Comparing 'In Case' cases for smart phones & 'Wrap it up' gift wrapping service

• In case : 1500 rent, 2 employees, 2000 & 4500 inventory & equipment expense
• Wrap it up : 1500 rent, 5 employees, 1500 & 2500 inventory & equipment expense

Land fixed cost requirements for both are same. However, In case needs less labour & more inventories, equipment expense. Wrap it up needs more labour, less inventory, equipment expense.

So, In case is relatively more capital intensive & Wrap it up relatively more labour intensive.