Production function is a function showing the highest output that a firm can possibly produce for every combination of inputs.
In the long-run production function, all of the production inputs are variable. However, in the short-run production function, there is at least one factor of input that cannot be varied.
A production function represents how inputs are transformed into outputs by a firm. We focus on the firm with one output and aggregate all inputs or factors of production into one of several categories, such as labor, capital, and materials. In the short run, one or more factors of production cannot be changed. As time goes by, the firm has the opportunity to change the levels of all inputs. In the long-run production function, all inputs are variable.
Production function is a function showing the highest output that a firm can possibly produce for every combination of inputs.
ReplyDeleteIn the long-run production function, all of the production inputs are variable. However, in the short-run production function, there is at least one factor of input that cannot be varied.
A production function represents how inputs are transformed into outputs by a firm. We focus on the firm with one output and aggregate all inputs or factors of production into one of several categories, such as labor, capital, and materials. In the short run, one or more factors of production cannot be changed. As time goes by, the firm has the opportunity to change the levels of all inputs. In the long-run production function, all inputs are variable.
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