Which of the following statements about factors of production is the most accurate?

• A. Entrepreneurship is not considered a factor of production in economics.
• B. Factors of production include land, labor, capital, and entrepreneurship.
• C. Land and capital are interchangeable terms for the same factor of production.
• D. Only physical capital and labor are considered factors of production.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the concept of factors of production. In economics, factors of production are the inputs used to produce goods and services. These typically include land, labor, capital, and entrepreneurship.
2. Step 2: Analyze each statement given in the problem. The first statement claims entrepreneurship is not a factor of production, which contradicts the standard economic definition.
3. Step 3: Consider the second statement, which lists land, labor, capital, and entrepreneurship as factors of production. This aligns with the widely accepted classification in economics.
4. Step 4: Evaluate the third statement that land and capital are interchangeable. This is inaccurate because land refers to natural resources, while capital refers to man-made resources used in production.
5. Step 5: Review the fourth statement that only physical capital and labor are factors of production. This excludes land and entrepreneurship, which are also essential factors, making the statement incomplete.