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FAQs on Chapter 6: Production Function - Lecture Notes, Economics - Class 12

1. What is a production function?
Ans. A production function is a mathematical representation of the relationship between inputs used in production and the resulting outputs. It shows how different combinations of inputs, such as labor and capital, can produce different levels of output.
2. How does a production function relate to the concept of productivity?
Ans. A production function provides a framework for understanding productivity. By analyzing the relationship between inputs and outputs, it helps us identify the most efficient combination of inputs to maximize output. This allows us to measure and improve productivity by optimizing the allocation of resources.
3. What are the key factors that influence the shape of a production function?
Ans. The shape of a production function is influenced by several factors. Firstly, the availability and quality of inputs, such as labor, capital, and technology, play a significant role. Secondly, diminishing returns to scale can also affect the shape. As more units of input are added, the additional output may decrease at a diminishing rate.
4. Can a production function exhibit increasing returns to scale?
Ans. Yes, a production function can exhibit increasing returns to scale. This occurs when an increase in all inputs leads to a more than proportionate increase in output. In other words, the production process becomes more efficient as the scale of production expands. This can be due to factors such as economies of scale or improved specialization.
5. How can a production function be used to make business decisions?
Ans. A production function provides valuable insights for business decision-making. It helps firms determine the optimal combination of inputs to minimize costs and maximize output. By analyzing the production function, firms can identify areas of inefficiency and make improvements to enhance productivity. Additionally, it assists in forecasting and capacity planning, enabling firms to optimize resource allocation and make informed decisions about expansion or contraction.
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