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CA Foundation · Business Economics · Theory of Production and Cost

Which of the following correctly describes the production function in Business Economics?

A production function is the relationship between quantities of inputs used and the maximum output obtainable from them, given the existing technology. It is a physical, technical relationship, unlike supply or cost functions, which relate output to price or to money cost.

  1. AA relationship between the quantity of inputs used and the maximum output obtainable from them, given the state of technologyCorrect
  2. BA relationship between the price of a good and the quantity supplied by the firm
  3. CA relationship between total cost and the quantity of output produced
  4. DA relationship between the firm's revenue and its profit at different prices

Explanation

A production function expresses the technical relationship between physical inputs and the maximum physical output that can be produced with a given technology. The supply relationship links price and quantity supplied, and the cost relationship links output with cost. Neither of these describes physical input-output relations.

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