Introduction to Production Functions

Inputs to production are called factors of ______.

Capital goods are those inputs to production that are themselves produced ______.

We will always use the term financial ______ for the money used to start up or maintain a business.

The set of all combinations of inputs and outputs that comprise a technologically feasible way to produce is called a ______ set.

The production function measures the maximum possible output that you can get from a given amount of ______.

Nature imposes technological ______ on firms, limiting feasible production plans.

Capital is sometimes used to describe the money used to ______ up or maintain a business.

The boundary of the production set is depicted in a ______.

Inputs and Outputs

Inputs to production are called factors of production, often classified as land, labor, capital, and raw materials.
Capital goods are produced goods used in production, like machines, tractors, buildings, computers.
Capital can also refer to the financial capital used to start or maintain a business.
Inputs and outputs are often measured in flow units (e.g., amount of labor per week, machine hours per week).
Technology constraints limit combinations of inputs to produce a given output level.
Production plans are technologically feasible combinations of inputs and outputs.
A production set represents all possible technologically feasible combinations of inputs and outputs.
Given a cost of inputs, firms aim to maximize output for a given level of input.
The production function describes the maximum output achievable with a given input.

Production Function

Production functions measure maximum possible output given input levels.
Applies to multiple inputs, for example, two inputs x₁ and x₂ determine output y. (y = f(x₁, x₂)).
Production functions determine the boundary of the production set.

Isoquants

Isoquants show possible input combinations to produce a specific output level.
Similar to indifference curves but represent output levels, not utility level.
Labeling on isoquants is fixed by technology, not arbitrary like utility levels.

Explore the key concepts of production functions and factors of production in this quiz. Understand how inputs like labor and capital can influence output levels. Test your knowledge on the relationships between production constraints and maximum achievable outputs.