Managerial Economics

Chapter 8

Production Function

After studying this chapter, you should be able to understand:

• The supply of a good is determined by, to a large extent, the cost of production of the good.
• Production is a process, where inputs are converted into an output.
• The production function is a technological relationship between the physical inputs and outputs in a particular time, given the technology.
• The law of variable proportions occurs in the short run where to increase production only one of the factors of production is increased while the others are kept fixed.
• The law of returns to scale occurs in the long run where to increase production all the factors of production are increased.
• An isoquant depicts the various combinations of two factors of ...