Which of the following is an example of a “hidden” production function?
A) producing a computer
B) manufacturing a television
C) assembling a motorcycle
D) transplanting a liver
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The Correct Answer is D) transplanting a liver
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Production Function
Production Function in economics represent the technological relationship between inputs and outputs, measured in both physical quantities and in terms of outputs. A key concept in mainstream neoclassical theories is the production function, which is used to define marginal product and to describe allocative efficiency, a key area of economics. The purpose of the production function is to target the allocation of factors in production and the distribution of income to those factors, while abstracting from, and abstracting from, the technical problems of achieving efficiency, as a manager or engineer might understand it.
In economics, researchers often use Shephard’s distance functions rather than directing distance functions when they are dealing with many outputs and many inputs. They are generalizations of the simple production function. Macroeconomic models use aggregate production functions to determine how much economic growth is due to changes in factors of production (e.g. the accumulation of capital) and how much is due to advances in technology. The concept of an aggregate production function is rejected by some non-mainstream economists, however.
Main features of Production Function
a) Substitutability
A factor of production is an input that is substituted for another, allowing the amount of an input to be varied while the quantities of all other factors remain constant. The law of variable proportions arises from the substitutability of the factors of production.
b) Complementarity
The factors of production are complementary such that if either of the inputs is absent, there will be no production. Therefore, two or more inputs are needed to create something, as nothing will be produced if they are absent. Another manifestation of complementarity of inputs is the principle of returns to scale, which implies that all inputs have to be increased simultaneously in order to raise the level of output.
c) Specificity
The data reveals that specific inputs are required for the production of certain products. Among the specific factors of production are machines, equipment, and specialized workers. Certain factors may also be used to produce other commodities, so the specificity may not be complete. There is no way to ignore any of the factors in the production process, and even the slightest degree of ignorance is not possible if the factors are perfectly specific.
Time is an integral part of production, and thus how the inputs are combined is greatly influenced by the length of time at hand. When the period of production is longer, the producer has more freedom to vary the quantities of various inputs used. In the production function, we cannot vary total output by changing all inputs at once, but we can vary it by changing one input at a time.
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I am Smirti Bam, an enthusiastic edu blogger with a passion for sharing insights into the dynamic world of business and management through this website.
I hold a MBA degree from Presidential Business School, Kathmandu, and a BBA degree with a specialization in Finance from Apex College,
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