Land, labor, capital and entrepreneurship

Grade 12 Social Studies Worksheet - Building Confidence

Circle the best answer.

1. Read this first

   Daily output at Hollis Bakery (made up)

   Bakers	Loaves a day	Extra loaves from the last baker
   1	60	60
   2	110	50
   3	150	40
   4	180	30
   5	200	20
   6	210	10

   Note: Hollis Bakery is made up. Card A: One oven and one kitchen stay the same; only the number of bakers changes. Each loaf sells for $2, a baker's wage is $70 a day, and the lot the bakery sits on rents for $30 a day. Card B: Economists sort inputs into land (the ground and natural resources), labor (people's work), capital (made goods used to make other goods, such as an oven) and entrepreneurship (organizing the others and taking the risk). Rent is the payment to land, wages to labor, interest to capital and profit to the entrepreneur. Card C: A mixer for the bakery (made up) rents for $25 a day and adds 15 loaves a day at any number of bakers. Card D: The owner, Mo Hollis, paid for the oven with $20,000 of savings.

2. 1.

   Bo wants the number of bakers that leaves Hollis the most profit at card A's prices. Which choice is best?

   • One baker: the first baker adds the most extra loaves, 60, so hiring should stop there
   • Six bakers: total loaves keep rising with every hire, all the way up to 210 loaves a day
   • Four bakers: they average 45 loaves each, worth $90 a baker, which beats the $70 wage
   • Three bakers: the third adds $80 for a $70 wage, but the fourth adds only $60
3. 2.

   A wage rise to $90 a day hits Hollis. Everything else on card A stays put. Esme asks for the best number of bakers now.

   • One baker: the first adds the most, $120, so the later bakers are not worth hiring
   • Four bakers: a higher wage means Hollis needs more people to cover the cost of the bakery
   • Two bakers: the second adds $100, but the third adds only $80 against a $90 wage
   • Three bakers: the average of 50 loaves a baker is worth $100, still above the $90 wage
4. 3.

   Jun sorts what Hollis pays and keeps with three bakers. Which match of payment to factor fits cards A and B?

   • Wages of $210 go to labor, rent of $30 to land, and the $60 left is the entrepreneur's profit
   • The $210 of wages goes to labor, and the rest, $90, goes to Mo as the entrepreneur's profit
   • The $210 of wages and $30 of rent are costs, and the $300 of sales is what Mo takes home as profit
   • The $30 rent is a payment to capital for the ovens, and the $60 left over is a wage for Mo's own work
5. 4.

   Mo paid for the oven with $20,000 of savings. Kira asks what counts as capital under cards B and D. Which is right?

   • The oven is land because it stays in one place and was not made by the bakers who use it
   • Neither counts as capital, since an oven wears out and cannot make the next oven or its own parts
   • The $20,000 is capital because it paid for the oven, and money is what keeps the bakery running
   • The oven is capital because it is a made good that makes loaves; the $20,000 is only money
6. 5.

   A rival says Mo's profit works like a wage. Luz replies using card B and the chart. Which reply is strongest?

   • Profit is guaranteed because Mo pays the others first, so the bakery cannot lose money on any day
   • Profit pays for organizing and risk and can fall below zero: with six bakers, costs top sales by $30
   • Profit is whatever sales are left after wages alone, so the rent plays no part in what remains
   • Profit is a wage for Mo's labor, so it belongs with the $70 a day paid to each of the bakers
7. 6.

   Hollis rents the mixer. Does that change how many bakers are worth hiring at the $70 wage, Noah asks?

   • No: the mixer adds the same 15 loaves at any number of bakers, so each baker's extra is unchanged
   • Yes, it falls to two: the mixer does part of a baker's work, so Hollis needs fewer bakers
   • Yes, it rises to four: capital raises what the next worker adds, so more bakers pay
   • Yes, it rises to four: four bakers and the mixer make 195 loaves, about 49 each, worth $98
8. 7.

   Hollis could add a fourth baker or rent the mixer. Which gives the better return for its cost, Ren asks?

   • The mixer: it brings $30 of loaves for $25, while the fourth baker brings $60 for $70
   • Both: each adds loaves, so any input that adds loaves is worth buying at these prices
   • The fourth baker: 30 extra loaves is twice the mixer's 15, so labor pays better than capital
   • The fourth baker: a baker's average of 45 loaves, worth $90, beats the mixer's 15 loaves
9. 8.

   Tala reads the chart and the cards. Which claim do they support best?

   • Total loaves fall after four bakers, so Hollis should stop hiring there and keep four
   • Each extra baker adds more loaves than the one before, as bakers share out the work
   • Each extra baker adds fewer loaves than the one before, though total loaves keep rising
   • Later bakers work less hard than the earlier ones do, which is why they add fewer loaves
10. 9.

    A student says the chart proves labor alone makes the loaves. Zee tests that with card A. Which response is best?

    • Card A holds the oven and kitchen fixed, so extra loaves come from labor working with them
    • The chart says nothing about capital, because it lists bakers and loaves per day, not equipment
    • The claim holds: the number of bakers changes, so labor alone produces the loaves sold
    • The oven and the lot are forms of labor, since people must use them to make the loaves
11. 10.

    Loaves per baker fall as Hollis hires more: 60, 55, 50, 45, 40, 35. Which explanation fits the cards best, Ari asks?

    • More bakers share the same oven and lot, so each added baker has less equipment to use
    • Each added baker costs more than the last one did, so output per baker falls as a result
    • Later bakers are less skilled than the first ones were, so they make fewer loaves each
    • The oven counts as labor, so adding bakers adds more of the same input and nothing new to the oven