A:

Factors of production are inputs used to produce an output, or goods and services. They are resources that a company requires in an attempt to generate an economic profit by producing goods and services. Factors of production are divided into four categories: land, labor, capital and entrepreneurship.

Land is the natural resource that an enterprise uses to produce goods and services to generate a profit. Land is not just restricted to the physical property or real estate. It includes any natural resources the land produces, such as crude oil, coal, water, gold and natural gas. The resources are natural materials that are included in the production of goods and services.

Labor is the amount of work laborers and workers perform that contributes to the production process. For example, if a laborer works and her efforts create a good or service, she contributes to labor resources.

Capital is any tool, building and machine that is used to produce goods or services. Capital varies throughout each industry. For example, a computer scientist uses a computer to create a program; his capital is the computer he uses. On the other hand, a chef uses pots and pans to deliver a good and a service. The pots and pans are the chef's capital.

Entrepreneurship combines these factors of production to earn a profit. For example, an entrepreneur brings together gold, labor and a machine to produce jewelry. The entrepreneur takes on all the risks and rewards that come with producing a good or service.

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