Production function for a product is based on certain assumptions. Indicate the correct code from the following : (a) Complementarity (b) Substitutability (c) Product elasticity (d) Specificity Codes :
Production Function Assumptions Explained
A production function represents the relationship between the quantity of inputs used and the quantity of output produced. It is based on several core economic assumptions about how these inputs behave and interact.
Key Production Function Assumptions
Standard economic theory assumes the following regarding production functions:
- Complementarity: This assumption states that some inputs are complementary, meaning they must be used together to produce output. For example, a specific machine might require a skilled operator to function. This corresponds to option (a).
- Substitutability: This assumption posits that different inputs can be substituted for one another to varying degrees while achieving the same level of output. For instance, a company might use more labor instead of capital, or vice versa. This corresponds to option (b).
- Specificity: This relates to the specific nature and requirements of the inputs needed for a particular production process. The function defines the exact inputs involved. This corresponds to option (d).
Why Product Elasticity is Different
Product elasticity (Option c) measures how output changes in response to a change in a specific input, while holding other inputs constant. While it's a crucial concept derived from and analyzed using the production function, it is not considered a fundamental assumption about the *nature* of the input relationship itself, unlike complementarity and substitutability.
Conclusion
Based on standard economic principles, the core assumptions inherent in the structure and application of production functions are Complementarity (a), Substitutability (b), and Specificity (d). Product elasticity is a measure derived from the function, not a foundational assumption.
Important Questions from Production Function
What is constant along an isoquant?
During the first stage of a total product curve, the total product is ______
Match List I with List II
LIST I
(Production Cost)
LIST II
(Underlying Meaning)
A.
Implicit Costs
I.
Change in the total cost per unit change in output.
B.
Marginal cost
II
Total increase in costs resulting from the implementation of a particular managerial decision.
C.
Incremental Cost
III.
Inputed value of inputs owned and used by the firm.
D.
Sunk Cost
IV.
The costs that are not affected by managerial decision.
Choose the correct answer from the options given below:
For the following two statements of Assertion (A) and Reasoning (R) suggest the correct code:
Assertion (A): Low initial price regarded as the principal means for entering into mass market for some new products.
Reasoning (R): Firms generally enter into production of new products with excess capacity of the plant initially.
Code:
Indicate the correct code from the following types of the long run average cost curves on which the minimum average cost of production in long run can be determined:
(i) Long run average cost curve under normal production function
(ii) Long run average cost curve under linearly homogeneous production function
(iii) Planning curve
(iv) Envelope curve
Choose the correct answer from the code given below :
