A fixed proportions production function:

Question

Quizplus · Accepted Answer

A fixed proportions production function is one where the inputs of labor and capital have to be used in a fixed ratio to produce output. This results in L-shaped isoquants, where there is no substitution possible between labor and capital. As a result, the marginal rate of technical substitution is not constant, but rather undefined. However, fixed proportions production functions are rare in practice and are not commonly observed. A fixed proportions production function has L-shaped isoquants, as it requires a fixed proportion of inputs to produce output without any substitution. Therefore, there can only be discrete points on the isoquant where output increases, which causes L-shaped isoquants.

A Fixed Proportions Production Function