A production function shows the
A) Minimum amount of output that can be obtained from alternative combinations of inputs.
B) Maximum quantity of inputs required to produce a given quantity of output.
C) Maximum output that can be produced with varying combinations of factor inputs.
D) Output capacity of the entire economy.

Question

Quizplus · Accepted Answer

A production function shows the maximum output that can be produced with varying combinations of factor inputs. It shows the relationship between inputs and outputs and is used by firms to determine the most efficient way to produce a given level of output. Option A is incorrect because a production function does not indicate the minimum amount of output, but rather the maximum. Option B is incorrect because it does not represent the relationship between inputs and output as it just represents the inverse of the relationship explained in option C. Option D is incorrect because a production function only describes the production capacity of one firm or an industry, not the entire economy.

A Production Function Shows the