Firm part 1

Question 1

Define the Production Process

Answer 1

The production process (or technology) of the firm describes how firms transform inputs into outputs

Question 2

Define inputs

Answer 2

These are the resources used in production

Question 3

What are the 3 inputs

Answer 3

1. Capital (K): Land, buildings, machinery/equipment
2. Labor (L): Skilled and unskilled (or less skilled) workers
3. Materials (M): Natural resources, raw materials, processed products

Question 4

Define Outputs

Answer 4

These are the result of the production process

Question 5

What are the 2 types of outputs

Answer 5

1. Physical product: Car/computer chip/gasoline
2. Services: Haircut/consulting service/automobile tune-up

Question 6

Define the production function

Answer 6

The production function summarizes the maximum quantity of output that can be produced with different combinations of inputs, given current knowledge about technology and organization

Question 7

What is the restriction to the production function

Answer 7

Because it displays the max. level of output that can be produced, the production function only reports efficient production processes