CMA Foundation · Fundamentals of Business Economics and Management · Utility, Wealth, Production
In economics, a production function expresses the relationship between:
A production function links physical inputs to the maximum physical output obtainable from them with the existing technology. It is a technical relationship, not a cost, revenue or demand relationship, so only the input-output description is correct.
- APhysical inputs used and the maximum physical output obtainable from them, given the technologyCorrect
- BTotal cost incurred and the price charged by the firm
- CMoney income of consumers and quantity demanded
- DTotal revenue and profit earned by the firm
Explanation
A production function is a technical relationship showing the maximum output that can be obtained from various combinations of inputs, given the state of technology. The cost-price and income-demand relationships describe cost and demand, not production.
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