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?

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

T he two business are clearly two different ventures. The In Case is for the manufacturing of goods while the Wrap it Up is the sale of services. They would be paying the same amount for rent of building since this is a fixed cost which is not affected of its production. The employees needed by Wrap It Up will be more than In Case since service is more on having people to conduct the service. The In Case on the other hand will require more inventory than Wrap it Up in their operations. Equipment expenses is greater in In Case than Wrap it Up since the manufacturing process will require equipment more than the service.