A firm's production function shows

Question

BlackTom AI · Accepted Answer

When analyzing the statement and its options, start by clarifying what a production function represents in economics.
Option A: 'how wages and rents are determined' describes factor pricing and the allocation of income from production, which is more about the factor market and income distribution rather than the production process itself. It does not specify the input-output transformation that a production function captures.
Option B: 'how inputs of capital and labor combine to produce output' directly aligns with the core idea of a production function: it shows the relationship between inputs (like capital and labor) and the resulting level of output, typically assuming a given level of technology and organizational efficiency. This is the standard definition.
Option C: 'how profits are maximized' concerns optimization under costs and revenues, which involves decision rules for pricing, production scale, and cost management. While the production function influences feasible output, profit maximization combines many other elements and is not the primary description of a production function itself.
Option D: 'how technology is invented' speaks to technological change, innovation, and empirical processes outside the formal specification of a production function, which usually treats technology as given or fixed for the analysis at hand.
In light of these distinctions, you can see that option B most accurately reflects the purpose and content of a production function, while the other options address related but distinct concepts in economics. The production function is the tool that maps input quantities to output under a given technology, rather than detailing factor prices, profit optimization, or technology creation.

ECON_002_001_25F Problem Set 2

A firm's production function shows

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ECON_002_001_25F Problem Set 2

A firm's production function shows

View Explanation

Log in for full answers

Similar Questions

Use the following graph to answer the next question, where LRATC = long-run average total cost. What happens when a firm adopts a new technology?

What do you think would be the Cobb-Douglas single best prescription for poor countries to catch up with the rich?

From the Cobb-Douglas production function we learn that there are two sources that help explain cross-country differences in per capita income: ________ and ________.

Which of the following changes would shift the entire production function upward?

Refer to the following figure when answering the following questions. Figure 4.1: Production Function Consider Figure 4.1. For given and fixed ˉ L , the shape of this production function suggests that α in the production function Y=Kα ˉ L 1−α is ______.

A production function is a technological relationship between:

An economy's factors of production and its production function determine the economy's:

More Practical Tools for Students Powered by AI Study Helper

Making Your Study Simpler

From the Cobb-Douglas production function we learn that there are two sources that help explain cross-country differences in per capita income: and .