Production Theory

Question 1

Production theory

Answer 1

• It focusses the relationship of the input of production factors and the respective output
• Production functions are supposed to express principles between input and output of production

Question 2

General production functions

Answer 2

x = f (q1, q2, q3, q4, …., qn),

x = Output of goods produced
f ( ) = production function
q = production factors used
n = number of different production factors

Question 3

Substitutional production

function

Answer 3

• Production factors do not come in a specific
proportion
• Changing a production
factor usually leads to a
change in output
• Identical output can be
generated from different
combinations of
production factors, as they substitute each other

Question 4

Fixed proportion production function

Answer 4

• Production factors do
come in a specific
proportion
• Changing one production factor does not lead to a
change in output
• Changing the level of
output requires changing all factors of production

Question 5

Proportion of Production Factors and Output

Answer 5

Production function, Type A, law of diminishing returns.

• Typical for agricultural
production
• Increase of production
factor leads to increase
of output
• Increase of output is
decreasing