Discuss EIGHT assumptions made for a production function analysis.

      

Discuss EIGHT assumptions made for a production function analysis.

  

Answers


Jim
-The production function is defined only for the non-negative values of inputs and outputs.
-The production function presupposes technical efficiency. This means that every possible
combination of inputs is assumed to result in maximum level of output.
-The input- output relationship or the production function is single valued and continuous.
-The production function is characterized by i) decreasing marginal product for all factor-
product combinations; ii) decreasing rate of technical substitution between any two factors; and iii) an increasing rate of product transformation between any two products.
-The returns to scale are assumed to be decreasing.
-All the factors of production and products are perfectly divisible.
-The parameters determining the firm’s production function do not change over the time period considered. Also, these parameters are not allowed to be random variables.
-The exact nature of any production function is assumed to be determined by a set of technical
decisions taken by the producer.
jim items answered the question on March 18, 2019 at 17:07


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