Question

read the following scenario

a clothing company wants to expand into new regions. it is looking at an urban area with a large number of vacant warehouses. the population is made up of people with average educations and a lower standard of living. the company is experiencing slower sales but has hopes that product will take off and be successful.

which of the factors of production will the company need to address most closely when making its decision to expand?

○ land
○ capital
○ land and labor
○ labor and capital

Explanation:

1. Analyze the scenario: The company has slower sales (impacting capital availability) and needs to expand. Also, the population has average education (labor quality) and lower living standards (affecting labor costs or availability).
2. Evaluate options:

• Land: Vacant warehouses are available, so land (physical space) is less of an immediate concern.
• Capital: Slower sales mean less revenue, so capital (funds for expansion, operations) is a concern.
• Land and labor: Land is available, so this is not the main focus.
• Labor and capital: Labor (from the population with average education, lower living standards – affecting labor costs/availability) and capital (due to slower sales, need for funds to expand) are both critical. The company’s hope for product success relies on having capital to sustain expansion and labor to produce/sell, while land is already available (vacant warehouses). So labor (workforce) and capital (financial resources) are the key factors here.

Answer:

D. labor and capital