1.In words of Henderson and Quandt, “Production function
is an engineering concept which explains the technological relationship between
physical inputs and outputs of the goods present in production”.
2. According to the N Gregory Mankiw, “Relationship
between factors of production and production is production function”.
It
is clear from the above table that changes in means in the long-term are in
equal proportion. Their mutual proportion remains as earlier.
Question
20. Is means of long-term production function, highlighted with a straight line
in the formula?
Answer: Ip
the long-term production function, every means is variable, none of them is
static. Therefore, there is no straight line drawn above the means in the
formula of long-term production function. The formula of production function in
this case is – P = f (L, Ld, K, T, E)
Question
21.nExplain in brief the concept of production function.
Answer: The production of any commodity depends on the means of production.
Thus, the relationship between the means of production and its production is
called production function. It defines the physical relationships between
quantity of production and means of production in a given time period. It is a
quantitative relationship, not a qualitative one.
Question
22. Explain in brief the characteristics of production function.
Answer: Following are the main characteristics of production function:
1.Production function is an engineering concept.
2.Production fundction is cost independent, i.e. it is
not dependent on costs.
3.Production function is related to the flow of means and
production.
4.On the basis of time period, it is short-term and long-term.
5.Production function relates to a fixed time factor.
6.It is related with the given technology.
7.Production function accepts the substitution
possibilities of means of production.
Question
23. Describe the assumptions of production function.
Answer: The
following are the assumptions of production function :
· There should be no change in the level of technical knowledge.
· The costs of means of production should remain the same.
· Production function is related to a definite time period.
· The means of production should be divisible.
· The most efficient techniques of production should be employed.
· The means of production can be substituted upto a limited
extent.
· There is uniformity among the means of production.
· The objective of the firm should be maximization of production.
Question
24. Between law of diminishing marginal production or law of returns of
variable proportions of means, which term according to you, is correct and why?
Explain in brief.
Answer: Economists
like Adam Smith, Prof. Marshall and Ricardo related the law of diminishing
marginal production with agriculture. They were of the view that if no
improvement is made in agricultural techniques, then by increasing the quantity
of labour and capital used on land, there will be less increase in general
proportion of total produce. Modern economists do not agree with this concept.
According to modem economists, this law applies in the sphere of manufacturing.
The supporters of this ideology are economists John Robinson, Benham, Stigler,
Bolding, etc.
According
to modem economists, this law is ultimately applicable to every field of
production. Initially, the production increase law applies, then, the law of
equal production, and finally diminishing production law applies. Hence, these economists
call this ideology “the law of returns of the variable proportions of means”.
This name seems more appropriate, since it explains all the three states of
production.
Question
25. Explain in brief the difference between returns to scale and returns to
expenditure outlay.
Answer: In
the case of returns to scale, changes are made in all sources by equal
proportion or percentage, not by different proportions or percentages. As such,
changes are not made in land area by 20%, capital by 10% and workers by 50%.
When the means of production are converted according to the expenses incurred
on them in equal or varying proportion, then it is known as the Return of
Outlay/Expenditure.
Long Type Questions
Answer:
Following differences can be seen between short-term and long-term production
function:
1. Short-term production function is related to the law of variable ratios,
while long-term production function is relatted to the return of scale.
2.
In the short-term production function, or law of variable ratios, some means
are static while some are variable, because firms do not have that much time to
make changes in every means. While in a long-term production function, every
means is varied, since firms have that much time that they can vary every
means. .
3.
Short-term production function is real, because it can be seen in real, while
long run production function is not real, since it is not really seen in any law.
4.
In the short-term production function, the costs of variable means of
production do not remain constant, while in the long-term production function,
the price of produced commodity and cost of means are considered as constant.
5.
The increased and decreased return in both the production functions are
regulated through different reasons. In short-term production function, they
are active because in this type of production, one mean is considered static
while others are considered varied, and in long run production function, they
are active due to the internal and external savings and the components.
Question
2. State the definition of production function and also state its
characterstics.
Answer:
Production function is the physical or quantitative relation between production
and the means which contribute in production. Following are the definitions of
production function-
1.
In words of Henderson and Quandt, “Production function is an engineering
concept which explains the relationship between input and output. This relation
is quantitave and assumes a fixed, given technology”.
2.
As per Dr Balwant Kandoi, “If quantity of production is Q and the factors of
production like labour, capital, land, management and technique (Ld, L, K, O)
are used, then we will write the Production function as:
Y = f (Ld, L, K, O)”
3.
According to the N Gregory Mankiw, “Relationship between physical quantity
factors of production or inputs and the production is production function”.
4.
According to Watson, “The relationship between a firm’s physical production
(output) and the material factors of production (inputs) necessary to produce
it is called production function”.
On
the basis of the above definitions, production function can be defined in
simple terms as follows :
Production
Function is the physical relation between Input and Output.
General
characteristics of Production Function
1.
Production Function is cost independent- Production Function has no relation
with the price of produced goods and the cost of means used to produce them.
Its relation is mainly with the physical quantities of production. Although,
each producer, at the time of deciding the level of production or selecting the
combination of means, always keeps the price of goods and means in his mind.
2.
Production Function is an Engineering concept, not an economic concept- The
task of Production Function is to interpret the relation between the means of
production and the physical level of production. Therefore, it is considered as
an Engineering concept, not on economic concept.
3.
Production Function is a time dependent concept- The relation of production
function is with a specific time period. It does not have any meaning if the
time period is changed. That is why it is considered as a time dependent
concept.
4.
Production Function accepts the substitution possibilities of means – The
concept of Production function accepts that the substitution possibilities of
means of production exist, meaning one means can be used in place of another.
Example- capital can be used in place of labour.
5.
Production Function accepts the complete divisibility of means- Production
Function accepts the complete divisibility of means; that means, it accepts
that every mean of production can be divided.
6.
Production Function is related to a definite given technique- The technique of
production must not vary, it is based on the single technique. When the
technique is of lower grade, without even decreasing the level of means, the
production can be decreased.
7.
Production Function is the subject of static economics- The concept of
Production Function is the subject of static economics because under this, cost
of means, level of technical knowledge and the timeline is considered to be
constant.
8.
Production Function is short-term or long-term on the basis of time period-
Production Function is categorised as short-term or long-term on the basis of
time period. There is a difference between these two types of production
functions on the basis of proportion of means. In short-term, the ratio of
varied and constant means keeps on changing with the production, while in long
term, the ratio of every means remains equal.
Question
3. Explain in detail the concept of production function.
Answer: The
functional relationship between physical input and physical output of a firm
with a given state of technology is known as Production Function. A production
function is a mathematical statement used to describe the technological
relationship between input and output in physical terms. In its general form,
it tells that production of a commodity depends on certain specific inputs. It
presents the quantitative relationship between input and output. Besides, the
production function represents the technology of a firm, of an industry, and of
the economy as a whole. A production function may take the form of a schedule
or table, a graphed line or curve, an algebraic equation or a mathematical model.
But each of these forms of a production function can be converted into its
other forms.
Definition
of Production Function
The concept of production has been differently defined by different economists
as stated below:
1.
In words of Alfa. C. Chiang, “Function is a group of combination for variables
(independent and dependent) in a specific order. The specialty of this function
is that any value of X determines a unique value of Y.”
2.
In words of Henderson and Quandt, “Production function is an engineering
concept which explains the relationship between input and output. This relation
is quantitave and assumes unchanging technology”.
3.
As per Dr Balwant Kandoi, “If quantity of production is Q and the factors of
production like labour, capital, land, management and technique (Ld, L, K, O,
T) are used, then we will write the Production function as:
Y = f (Ld, L,K,0, T)”
4.
According to the N Gregory Mankiw, “Relationship between factors of production
or inputs and outputs is production function”.
5.
According to Watson, “The production function is the relationship between a
firm’s physical production (output) and the material factors of production
(inputs) necessary to produce it.”
Features
of Production Function
Production
function has the following main features:
·
It indicates a functional relationship between physical input
and physical output of a firm.
·
The production function is always in context to a period of
time.
·
The production function can specify either the maximum output
that can be produced from a given set of inputs or the minimum quantity of
inputs required to produce a given level of output.
·
Production function is purely a technical relationship. It has
no reference to cost of inputs or costs of products.
·
Output in the production function is the result of combined use
of factors of production.
·
The production function includes all the technically efficient
methods of production.
Assumptions
of Production Function
·
It presumes a fixed given technology.
·
The costs of means of production remain the same.
·
Production function presumes a definite time period.
·
Combinations of factors of productions can be changed to an
extent only.
·
Factors of production are homogenous, i.e., labour = labour and
capital = capital.
·
Factors of production are variable.
·
Substitutability of factors of production is upto a limited
extent.
·
The objective of firm is output maximization.
Question
4. While differentiating the short-term and long-term production function,
explain each in detail.
Answer: Short-term:
Short-term is a period in which some factors are fixed and some factors are
variable. Fixed factors have fixed cost and variable factors have variable
cost.. Therefore, law of variable proportion applies here. In short-term,
output can be increased or decreased by changing variable factors only, but
fixed factors cannot be varied.
The
distinguishing characteristics of short-term is that certain factor-inputs are
fixed in character, while other factor inputs are variable in nature only. The
level of production can be changed. The scale of production cannot be changed.
The
behavior of output when one output and one input is varied and others are held
constant, is studied under the ‘law of variable proportions’. It is also known
as the ‘Law of Diminishing Returns’ and the ‘Law of Non-proportional Returns.’
Long-term:
Long period or long-term is defined as that period of time in which all factors
of production or inputs are variable. Distinction between fixed and variable
inputs obtains only in the short-term. In the long-term, all inputs become
variable, i.e. the scale of production itself can be changed by installing new
plant and equipment and hiring more labour and other factor inputs.
The
behaviour of output when all inputs are varied, is studied under the “law of
returns to scale”.
Very Short Answer Type Questions
Question
1. What is short term?
Answer: Short
term is the time period during which a firm can make changes only in its
variable factors but not in its fixed factors.
Question
2. What is long term?
Answer: Long
period or long-term is defined as that period of time in which all the factors
of production or inputs are variable.
Question
3. What do you mean by short term production function?
Answer: When
one production factor is changed while keeping all other factors constant, it
is called short-term production function.
Question
4. What do you mean by long-term production function?
Answer: In
long term, all the means of production are variable. The relation between
production and its factors in this period is called long-term production
function.
Question
5. The law of variable proportions is related to which time period?
Answer: It is
related to short time period.
Question
6. “Scale Return” is related to which time period?
Answer: It is
related to long time period.
Question
7. On the basis of time period, production function is of how many types? Ans. On the basis of time
period, production function is of two types-
1.Short-term production function, 2. Long-term production
function.
Question
8. State two assumptions of production function.
Answer:
1.A fixed, given technology is used., 2. Costs of means of
production remain the same.
Question
9. State two characterstics of production function.
Answer:
·
It indicates a functional relationship between physical input
and physical output of a firm.
·
The production function is always applied in context to a
certain period of time.
Question
10. What do you mean by scale?
Answer: Scale
can be a particular unit of measurement, like metre, litre, kilogram, hectare,
etc.
Question
11. What do you mean by “Return to Scale”?
Answer: In
economics, return of scale is established on that situation in which all the
means of production are converted into a certain ratio or percentage.
Question
12. Who was the economist who first used the term “Law of Diminishing Marginal
Production”?
Answer:
French Economist Prof. Turgot.
Question
13. State two types of production function.
Ans. Production function are of two types:
1.Cobb-Douglas production function, 2. Linear-Homogenous
production function.
Question
14. What is the use of production function in economics?
Answer: In
economics, to make decisions for optimum production, the information about
different alternative production functions of any goods and services is
necessary.
Question
15. State one difference between short-term and long-term production function.
Answer: In
short-term, the proportion of fixed and variable factors keeps on changing
along with the change in production. On the contrary, in the long-term, all
factor inputs can be varied,
Question
16. How is the supply of fixed means of production in the short term?
Answer: In short-term, the supply of fixed means of productionis in elastic.
Question
17. The quantity of production of goods and services depends on which two
factors?
Answer: The
quantity of production of goods and services depends on the following two
factors –
1.On cost of production factors., 2. On production function.
Question
18. State one definition of production function.
Answer:
According to the N Gregory Mankiw, “Relationship between the quantity of
factors of production and quantity of production is production function”.
Question
19. How can indicators of production function be written?
Answer: P = F
(L, K, Ld, M, T, C)
Where,
P = production function
F = Function
L = Labour
C = Capital
Ld = Land
M = Management
T = Technology
C = Courage or Entrepreneurship.
Question
20. Which production function is considered to he the most important among
different production functions?
Answer: The
Cobb-Douglas production function is considered to be the most important.
Question
21. Cobb-Douglas production function was rendered by whom?
Answer: This
production function was rendered by Prof. C. W. Cobb and P.H.Douglas.
Question
22. The concept of Production Function is the subject of which economics?
Answer: The concept of Production Function is the subject of a static economics
because under this, cost of factors, level of technical knowledge and the time
period is taken to be constant.
Question
23. Explain Production Function in a mathematical equation.
Answer:
Production Function can mathematically be stated through the following
equation:
X = f (a, b, c….n)
Where, X = production level of the goods, a, b, c, etc. are the means of
production like land, labour, capital, entrepreneurship, etc.
f = function.
Question
24. The commodity that is produced by a firm is known by what name in
economics?
Answer: The
commodity that is produced by a firm is known as Output in economics.
Question
25. The means through which production is done is known as what in economics?
Answer: The
means through which production is done is called Input in economics.
Question
26. What is function?
Answer:
Function means the quantitative relationship found between two variables
(independent and dependent variables).
Question
27. What is production function?
Answer:
Production function expresses the technical relationship between production
inputs and the final product. It shows the fundamental relationship between
quantity of production and means of production for a given time period.
Question
28. According to time period, what are the types of production functions?
Answer:
Production functions are of two types according to time period. These are:
1.Short-term production function , 2. Long-term production function.
Question
29. What does input mean?
Answer:
Inputs imply the means of production.
Question
30. What is meant by scale?
Answer: Scale
can imply any one specific unit of measurement, like metre, litre, kilogram,
hectare, etc.
Multiple-Choice Questions
Question
1. In short-term production function
(a) every
factor is constant
(b) every factor is varied
(c) some are
constant and some are varied
(d) None of
these
Question
2. In long-term production function-
(a) every
factor is constant
(b) every
factor is varied
(c) some are constant and some are varied
(d) None of these
Question
3. Production function means-
(a)
variations in the factors
(b) growth in production
(c) the
relationship between factors and production
(d) None of these
Question
4. The relationship of law of variable proportions is applicable in :
(a) short
term
(b) long term
(c) both Short term and Long term
(d) None of these
Question
5. This is not the characterstic of production function :
(a)
Production function is cost independent.
(b) Production function is an engineering concept.
(c)
Production function is the subject of Administrative economics.
(d)
Production function is a time independent concept.\
Question
6. The word “Function” is derived from-
(a) sociology
(b) maths
(c) physics
(d) none of these
Question
7. “Function” means-
(a)
quantitative relation between dependent and independent variables
(b)
qualitative relation between two variables
(c) quantitative and qualitative difference between two variables
(d) none of the above
Question
8. The product that is produced in economics is called-
(a) input or
means
(b) output or
produce
(c) input and
output
(d) none of these
Question
9.Production function defines the relationship between which two variables?
(a) Inputs
and outputs
(c) Demand
and cost
(b) Supply and cost
(d) Consumption and income
Question
10. Which relationship between means and product is defined by production
function?
(a) Quantitative
(b) Qualitative
(c) Economic
(d) None of these
Question
11. On the basis of time period, production and functions are :
(a)
short-term
(b) long-term
(c) medium-term
(d) Both (a)
and (b)
Question
12. Who did not use the term “law of diminishing marginal production”?
(a) Mrs. Joan
Robinson
(b) Marshall
(c) Stigler
(d) E.H.
Chamberlin
Question
13. In the production function P = f (L, K, N, T, E), what does the line drawn
above the factors of production mean?
(a) Factors
below the straight line are variable
(b) Factors
below the straight line are constant
(c) Factors
below the straight line are uniform
(d) None of these
