What is most likely to happen to businesses that lack capital as a factor of production?

• A. They can easily produce goods without any limitations.
• B. They will automatically have higher profits than competitors.
• C. They struggle to acquire necessary equipment and expand operations.
• D. They are unaffected because capital is not essential for production.

Answer: (C)

Verified step by step guidance

1. Understand the role of capital as a factor of production: Capital refers to the physical assets like machinery, tools, buildings, and equipment that businesses use to produce goods and services.
2. Recognize that capital is essential for efficient production: Without sufficient capital, businesses may face limitations in producing goods at scale or improving productivity.
3. Analyze the consequences of lacking capital: Businesses without enough capital often struggle to acquire necessary equipment, which limits their ability to expand operations or improve production processes.
4. Compare the incorrect options: Producing goods without limitations or automatically having higher profits is unlikely without capital, and capital is indeed essential, so being unaffected is not a valid outcome.
5. Conclude that businesses lacking capital are most likely to face operational challenges, such as difficulty in acquiring equipment and expanding, which can hinder their competitiveness and growth.