Practicing Success
Practicing Success
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| Which of the following statement/statements are true? Statement 1: If the technology improves, we have a new production function. Statement 2: Production function deals with inefficient use of inputs. |
Both the statements are true. Both the statements are false. Statement 1 is true and Statement 2 is false Statement 2 is true and Statement 1 is false |
| Statement 1 is true and Statement 2 is false |
| A production function is defined for a given technology. It is the technological knowledge that determines the maximum levels of output that can be produced using different combinations of inputs. If the technology improves, the maximum levels of output obtainable for different input combinations increase. We then have a new production function. A production function deals only with the efficient use of inputs. Efficiency implies that it is not possible to get any more output from the same level of inputs. Production function, therefore, tells us the maximum quantity of output (q) that can be produced by using different combinations of these two factors of productions- Labour (L) and Capital (K). |
