Question

Which of the following statement best describe the general form of a production function?
(i) It is purely technological relationship between quantities of input and quantities of output.
(ii) It represent the technology of an organization/sector of an economy.
(iii) Prices of inputs or of the output do not enter into the production function.
(iv) It is flow concept describing the transformation of inputs into output per unit of time.

• A. (i), (ii) and (iii)
• B. (i) and (ii)
• C. (i) and (iv)
• D. (i), (ii), (iii) and (iv)

Answer 1

The correct option is D (i), (ii), (iii) and (iv)

The elements of the production function are the inputs and output of the firm and how the former is changed into the latter. It considers the technology available to the firm and the economic sector it operates in. It does not factor in the prices of inputs or outputs, however the price of inputs is considered in the iso-cost line and used alongside the production function.