Which of the following statements about the simple model of production is NOT correct?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → Some time passes between combining the inputs and getting the output.
In the simple model, production is taken as instantaneous: no time passes between combining the inputs and getting the output.
Option (1) Production is assumed to be instantaneous. — True. This is one of the simplifying assumptions of the model.
Option (2) The terms production and supply are often used interchangeably. — True. The model uses production and supply to mean the same thing.
Option (3) Some time passes between combining the inputs and getting the output. — False. In the model no time elapses between combining the inputs and the output.
Option (4) Production is the process by which inputs are transformed into output. — True. This is how production is defined.
NCERT (2026-27): “A Firm Effort In the previous chapter, we have discussed the behaviour of the consumers. In this chapter as well as in the next, we shall examine the behaviour of a producer. Production is the process by which inputs are transformed into ‘output’. …” “A Firm Effort … We make certain simplifying assumptions to start with. Production is instantaneous: in our very simple model of production no time elapses between the combination of the inputs and the production of the output. We also tend to use the terms production and supply synonymously and often interchangeably. In order to acquire inputs a firm has to pay for them. This is called the cost of production. Once output has been produced, the firm sell it in the market and earns revenue. The difference between the revenue and cost is called the firm’s profit. We assume that the objective of a firm is to earn the maximum profit that it can.” |