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Production Function and Economic Efficiency

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Production Function and Economic Efficiency

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Questions and Answers

What is the purpose of the production function in economics?

To reject the concept of an aggregate production function

To address allocative efficiency in the use of factor inputs in production and the resulting distribution of income (correct)

To maximize technical efficiency in production processes

To minimize the accumulation of physical capital

What is one important use of aggregate production functions in macroeconomics?

To reject neoclassical theories

To distinguish how much of economic growth to attribute to changes in factor allocation and advancing technology (correct)

To focus on achieving technical efficiency in production

To define marginal product in economic models

What do researchers often use for modeling the case of many outputs and many inputs in economics?

Aggregate production functions

Simple linear equations

Marginal product functions

Shephard's distance functions or directional distance functions (correct)

Why is economic output not considered a mathematical function of input in general?

Because any given set of inputs can be used to produce a range of outputs Signup and view all the answers

What do aggregate production functions in macroeconomics help estimate?

How much of economic growth to attribute to changes in factor allocation and advancing technology Signup and view all the answers

What does the Theory of Cost help in making better decisions about?

Investing, saving, and budgeting money Signup and view all the answers

According to the Theory of Cost, what determines the supply of an organization?

Cost structure Signup and view all the answers

In Economics, what does the contemporary hypothesis of Cost examine?

Idea of cost, short-run total and average cost, long-run cost, and economic scales Signup and view all the answers

What does the cost function vary depending on?

Scale of operation, size of output, production cost, etc. Signup and view all the answers

Under the theory of comparative cost advantage, what determines an organization's supply?

Relative costs of all feasible organizational output options Signup and view all the answers