3.4.3 Making operational decisions to improve performance: increasing efficiency and productivity: How To Chose The Optimal Mix of Resources.

Question 1

What are the resources or inputs firm often use also known as?

Answer 1

The factors of production.

Question 2

Outline the factors of production.

Answer 2

Enterprise.
Labour.
Land.
Capital.

Question 3

Outline the factors influencing the choice between capital-intensive (CI) and labour-intensive (LI) production.

Answer 3

Method of production.

Skills and efficiency of the factors of production.

Relative costs of labour and capital.

Size and financial position of a business.

Product or service.

Customers.

Question 4

Define capital-intensive production.

Answer 4

Methods of production that use a high level of capital equipment in comparison to other inputs, such as labour.

Question 5

Define labour-intensive production.

Answer 5

Methods of production that use high levels of labour in comparison to capital equipment.

Question 6

Outline the method of production as an influencing factor when choosing between CI and LI production.

Answer 6

Some productions, such as a car plant, require capital equipment - machinery can produce more quickly and consistently than a human being. Large scale production usually means a firm will chose CI production methods.

Question 7

Outline the skills and efficiency of the factors of production as an influencing factor when choosing between CI and LI production.

Answer 7

Businesses that depend on the skills of its workers (e.g. hair salon), will use LI methods.

If machinery or other forms of capital can greatly lower unit costs or produce more consistent, high quality products - CI methods will be employed.

Question 8

Outline the size and financial position of a business as an influencing factor when choosing between CI and LI production.

Answer 8

Capital equipment is expensive to buy - small firms with cash flow difficulties may not be able to purchase them - resort to LI production.

Question 9

Outline the product or service as an influencing factor when choosing between CI and LI production.

Answer 9

The more standardised a product, the greater the advantages of CI production - machinery can produce vast quantities at low unit costs.

Question 10

Outline the customers as an influencing factor when choosing between CI and LI production.

Answer 10

If customers want personal contact - limits the scope for CI.