Optimal mix of resources

Question 1

Factors of production

Answer 1

• Land
• Labour
• Capital
• Enterprise

Question 2

Land

Answer 2

The use of land by a business to conduct their business.
Rent has to be paid to use Land.

Question 3

Labour

Answer 3

The use of employees by a business to conduct their business.
A wage must be paid to employ labour.

Question 4

Capital

Answer 4

The use of machines by a business to conduct their business.
Interest has to be paid to employ capital as a return on investment.

Question 5

Enterprise

Answer 5

The risk and reward undertaken by an entrepreneur to set up a business or an intrapreneur (within the business)
Profit has to be paid as a reward for the entrepreneur.

Question 6

The optimal mix of resources

Answer 6

They will decide if capital or labour intensive production is better suited to their business.

Question 7

Factors affecting whether to use capital or labour intensive production

Answer 7

• Type of production method
• Skill and efficiency of factors of production
• Costs of labour and capital
• Size and financial position of a business
• Type of product or service
• Customers
• Capital investment vs working capital investment