RBSE Solutions Class 12 Economics Chapter 6 Production Function

RBSE Class 12 Economics Chapter 6 Practice Questions

RBSE Class 12 Economics Chapter 6 Multiple Choice Questions

 

Question 1. Production function defines the relationship between which two variables ?
(a) Inputs and outputs
(b) Supply and cost
(c) Demand and cost
(d) Consumption and income
Answer: (a) Inputs and outputs
In simple words: A production function shows how much output you can get from different amounts of inputs. For example, how many goods can be made with a certain amount of labor and raw materials. It helps businesses understand how efficient they are.

🎯 Exam Tip: Remember that a production function always links physical inputs (like labor, capital) to physical outputs (products produced), not monetary values or prices.

 

Question 3. On the basis of time period, production and functions are :
(a) short-term
(b) long-term
(c) medium-term
(d) Both (a) and (b)
Answer: (d) Both (a) and (b)
In simple words: Production functions can be looked at for both short periods and long periods of time. In the short term, some things are fixed, but in the long term, everything can be changed. Understanding both helps in planning production strategies.

🎯 Exam Tip: Clearly distinguish between short-term (at least one fixed factor) and long-term (all factors variable) production functions in your explanations.

 

Question 4. Who did not use the term “law of diminishing marginal production"?
(a) Mrs. Joan Robinson
(b) Marshall
(c) Stigler
(d) E.H. Chamberlin
Answer: (d) E.H. Chamberlin
In simple words: Many famous economists talked about how adding more of one input (like workers) eventually leads to smaller increases in what you produce. E.H. Chamberlin, however, focused more on other economic ideas. This concept is vital for understanding resource allocation.

🎯 Exam Tip: When asked about specific economists, ensure you link them to the correct theories or concepts they are known for, or explicitly note if they did *not* use a particular term.

 

Question 5. In the production function P = f (L, K, N, T, E), what does the line drawn above the factors of production mean?
(a) Factors below the straight line are variable
(b) Factors below the straight line are constant
(c) Factors below the straight line are uniform
(d) None of these
Answer: (b) Factors below the straight line are constant
In simple words: In a production function, a line drawn above some letters means those production factors are fixed or do not change. Only the factors without the line are changed. This helps us understand what inputs are kept steady in certain situations.

🎯 Exam Tip: In economics, symbols like bars over variables indicate they are held constant, which is a key concept in analyzing short-run production decisions.

RBSE Class 12 Economics Chapter 6 Very Short Answer Type Questions

 

Question 1. What is function?
Answer: A production function shows the technical link between inputs and the final product. It explains how much output can be made from certain amounts of production resources over a specific time. This relationship is always about quantities, not qualities. It is a fundamental concept for businesses to manage their resources efficiently.

🎯 Exam Tip: Define "function" as a quantitative relationship, specifying the link between inputs and outputs, and highlighting its technical rather than qualitative nature.

 

Question 3. According to time period, what are the types of production functions?
Answer: Based on the time period, there are two main types of production functions:
1. Short-term production function
2. Long-term production function.
These categories help us analyze how firms can adjust their inputs over different time horizons.

🎯 Exam Tip: When classifying production functions by time, clearly state both the short-term and long-term types, as these are fundamental distinctions in economics.

 

Question 4. What does input mean?
Answer: Inputs are the various resources used in the process of production. These are the basic ingredients or means needed to create goods and services. For example, labor, raw materials, and machinery are all considered inputs.

🎯 Exam Tip: Always remember that "inputs" refer to the resources used to produce goods and services, such as labor, capital, and land.

 

Question 5. What is meant by scale?
Answer: In simple terms, 'scale' refers to a specific unit of measurement. It could be something like a meter, liter, kilogram, or hectare, which helps quantify inputs or outputs. Understanding the scale is crucial for measuring production effectively.

🎯 Exam Tip: Define 'scale' as a unit of measurement that quantifies aspects of production, such as meters for length or kilograms for weight.

RBSE Class 12 Economics Chapter 6 Short Answer Type Questions

 

Question 1. Explain in brief the concept of production function.
Answer: The creation of any product depends on the resources used to make it. A production function describes the link between these production resources and the final output. It shows the physical connection between the amount produced and the resources used during a specific time. This relationship is always about measurable quantities, not qualities. It is essential for understanding how efficiently a firm converts inputs into outputs.

🎯 Exam Tip: Emphasize that a production function is a technical, quantitative relationship between physical inputs and physical outputs over a specific time period.

 

Question 3. Describe the assumptions of production function.
Answer: The main assumptions when looking at a production function are:
1. The level of technical knowledge stays the same.
2. The costs of production resources do not change.
3. The production function applies to a specific time frame.
4. Production resources can be divided into smaller units.
5. The most efficient production methods are used.
6. Production resources can be replaced with each other to a certain extent.
7. All production resources are uniform or similar.
8. The main goal of the firm is to produce the maximum possible output.
These assumptions help simplify the analysis of how production works.

🎯 Exam Tip: List at least 4-5 core assumptions like fixed technology, specific time period, and output maximization to show a thorough understanding.

RBSE Class 12 Economics Chapter 6 Essay Type Questions

 

Question 1. Explain in detail the concept of production function.
Answer: The production function shows how physical inputs are linked to physical outputs in a company, given its technology. It is a mathematical way to describe the technical connection between what goes in and what comes out. Simply put, it tells us that the production of an item depends on certain specific inputs. It provides a numerical relationship between input and output. The production function also shows the technology used by a firm, an industry, or even the whole economy. This function can be shown as a table, a graph, an equation, or a mathematical model. It is the core tool for analyzing production efficiency.

The concept of production has been defined differently by various economists:
1. According to Alfa. C. Chiang, "A function is a set of combinations for variables (independent and dependent) in a specific order. The unique feature of this function is that any value of X determines a single value of Y."
2. Henderson and Quandt explain, "The production function is an engineering concept that describes the relationship between input and output. This relationship is quantitative and assumes unchanging technology."
3. Dr. Balwant Kandoi states, "If the quantity produced is Q and factors like labor, capital, land, management, and technology (Ld, L, K, O, T) are used, then the Production function is written as: Y = f (Ld, L, K, O, T)".

Features of Production Function
The production function has several important features:
1. It shows a functional relationship between the physical inputs and physical outputs of a firm.
2. The production function is always considered within a specific time period.
3. It can tell either the highest output possible from given inputs or the minimum inputs needed for a certain output level.
4. It is purely a technical relationship and does not consider the cost of inputs or products.
5. The output produced is a result of combining different production factors.
6. It includes all technically efficient methods of production.

Assumptions of Production Function
The production function works under these main assumptions:
1. It assumes a fixed, unchanging technology.
2. The costs of the production factors remain the same.
3. It assumes a definite time period.
4. Combinations of production factors can be changed only to a certain extent.
5. Factors of production are uniform (e.g., all labor is considered equal, all capital is considered equal).
6. Factors of production are variable (this might contradict other points, but in context, it means there's flexibility).
7. The ability to substitute one factor for another is limited.
8. The firm's main goal is to produce the maximum possible output.
In simple words: A production function is a key idea in economics that shows how a company turns its resources (like workers and machines) into products. It’s like a recipe that tells you exactly how much you can make with what you have. Economists have slightly different ways of explaining it, but they all agree it's about the physical relationship between what goes in and what comes out. It also has specific characteristics and assumptions, like using a fixed technology, to help understand how businesses operate.

🎯 Exam Tip: For essay questions, provide a comprehensive answer by defining the production function, stating its key features, and outlining its main assumptions, referencing economists if possible.

 

Question 2. While differentiating the short-term and long-term production function, explain each in detail.
Answer:
Short-term: The short-term is a period where some factors of production are fixed, and others are variable. Fixed factors, like machinery, have fixed costs, while variable factors, like labor, have variable costs. This is where the "law of variable proportions" applies. In the short-term, production can be increased or decreased by changing only the variable factors; the fixed factors cannot be changed. This period also involves the 'Law of Diminishing Returns' and the 'Law of Non-proportional Returns', where adding more of a variable input eventually leads to smaller increases in output.

Long-term: The long-term is a period where all factors of production or inputs are variable. The difference between fixed and variable inputs only exists in the short-term. In the long-term, all inputs can be changed. This means the overall scale of production can be altered by adding new factories, equipment, and hiring more workers and other resources. The behavior of output when all inputs are varied is studied under the "law of returns to scale".
In simple words: The short-term is when a company can only change some things, like the number of workers, but not big things like the factory building. The long-term is when the company can change everything, even build a new factory or use all new machines. It's like having some ingredients fixed in a recipe versus being able to change every single ingredient.

🎯 Exam Tip: Clearly define short-term by emphasizing fixed factors and variable factors, and long-term by stating all factors are variable; link each to its relevant "law" (law of variable proportions for short-term, returns to scale for long-term).

RBSE Class 12 Economics Chapter 6 Other Important Questions - Answers

RBSE Class 12 Economics Chapter 6 Multiple-Choice Questions

 

Question 1. In short-term production function
(a) every factor is constant
(b) every factor is varied
(c) some are constant and some are varied
(d) None of the options
Answer: (c) some are constant and some are varied
In simple words: In a short-term production situation, a company has some resources (like machines) that it cannot change, while other resources (like workers) can be changed easily. This mix of fixed and flexible resources defines the short run.

🎯 Exam Tip: The defining characteristic of the short-term is the presence of both fixed and variable factors of production, which limits immediate flexibility.

 

Question 2. In long-term production function-
(a) every factor is constant
(b) every factor is varied
(c) some are constant and some are varied
(d) None of these
Answer: (b) every factor is varied
In simple words: In a long-term production situation, a company has enough time to change all its resources, including machines, buildings, and workers. Nothing is fixed in the long run.

🎯 Exam Tip: The key feature of the long-term is that all factors of production are variable, allowing for complete adjustment of scale.

 

Question 4. The relationship of law of variable proportions is applicable in :
(a) short term
(b) long term
(c) both Short term and Long term
(d) None of these
Answer: (a) short term
In simple words: The law of variable proportions talks about what happens to output when you change only one input (like labor) while keeping others (like land) fixed. This situation only happens in the short term. It shows how efficiency changes when you add more of one input.

🎯 Exam Tip: The law of variable proportions is exclusively a short-run concept because it requires at least one factor of production to be fixed.

 

Question 5. This is not the characterstic of production function :
(a) Production function is cost independent.
(b) Production function is an engineering concept.
(c) Production function is the subject of Administrative economics.
(d) Production function is a time independent concept.
Answer: (c) Production function is the subject of Administrative economics.
In simple words: A production function mainly deals with how inputs physically turn into outputs and is often seen as a technical or engineering idea, not directly part of administrative economics. It is a fundamental concept for understanding how resources are transformed into goods.

🎯 Exam Tip: Remember that production functions deal with technical efficiency and resource transformation, making them core to microeconomics, not typically administrative economics.

 

Question 6. The word "Function" is derived from-
(a) sociology
(b) maths
(c) physics
(d) none of these
Answer: (b) maths
In simple words: The idea of "function" comes from mathematics, where it describes how one value depends on another. In economics, we use this math idea to show how output depends on inputs. It provides a formal way to model economic relationships.

🎯 Exam Tip: Recognize that many economic concepts, including 'function', have their roots in mathematical principles to describe relationships between variables.

 

Question. The product that is produced in economics is called-
(a) input or means
(b) output or produce
(c) input and output
(d) none of these
Answer: (b) output or produce
In simple words: In economics, the final goods or services that are made from inputs are called "output" or "produce". This is what a company creates to sell.

🎯 Exam Tip: Differentiate clearly between "inputs" (resources used) and "outputs" (products created) in economic terminology.

RBSE Class 12 Economics Chapter 6 Very Short Answer Type Questions

 

Question 1. What is short term?
Answer: The short term is a period during which a business can only change its variable factors of production, but it cannot change its fixed factors. This means things like machinery or buildings stay the same. It is a crucial concept for understanding immediate production adjustments.

🎯 Exam Tip: Define the short term as a period where at least one factor of production is fixed, distinguishing it from the long term.

 

Question 2. What is long term?
Answer: The long term, or long period, is defined as a length of time in which all the factors of production or inputs can be changed. In this period, a firm has enough time to adjust all its resources, including its plant size. This offers complete flexibility for production planning.

🎯 Exam Tip: The key defining feature of the long term is that all factors of production are variable, allowing a firm to alter its scale of operations.

 

Question 3. What do you mean by short term production function?
Answer: A short-term production function is when one factor of production is changed while all other factors remain constant. This allows economists to study how output changes when only one input is varied, which is important for understanding marginal productivity. It forms the basis of the law of variable proportions.

🎯 Exam Tip: Explain that a short-term production function involves varying only one input while others are held constant to observe output changes.

 

Question 4. What do you mean by long-term production function?
Answer: In the long term, all the resources used for production are variable. The relationship between the total output and all its changing factors during this period is called a long-term production function. This function helps analyze how changes in the scale of operation affect output. It is crucial for strategic long-range planning.

🎯 Exam Tip: Define the long-term production function as one where all inputs are variable, allowing for a change in the scale of production.

 

Question 6. "Scale Return" is related to which time period?
Answer: "Scale Return" is related to the long time period. This is because in the long run, a company can change all its inputs and thus alter the overall scale of its operations. It's about how total output changes when all inputs are increased by the same proportion.

🎯 Exam Tip: Connect "Returns to Scale" exclusively with the long-term, as it involves varying all factors of production proportionally.

 

Question 7. On the basis of time period, production function is of how many types? Ans. On the basis of time period, production function is of two types-
Answer: Based on the time period, production functions are of two main types:
1. Short-term production function
2. Long-term production function.
These two categories help us understand how businesses make production decisions depending on how much time they have to adjust their resources.

🎯 Exam Tip: For this question, simply listing the two types (short-term and long-term) is sufficient, as the question asks "how many types".

 

Question 8. State two assumptions of production function.
Answer: Two key assumptions of a production function are:
1. A fixed and unchanging technology is used.
2. The costs of the means of production remain constant.
These assumptions help simplify the analysis of input-output relationships in production. They provide a stable framework for economic models.

🎯 Exam Tip: Always include assumptions like fixed technology and constant input costs when describing a production function, as they define its analytical framework.

 

Question 9. State two characterstics of production function.
Answer: Two characteristics of a production function are:
1. It shows a working relationship between the physical amount of input and the physical amount of output from a firm.
2. The production function is always used in the context of a specific period of time.
These features highlight the technical and time-bound nature of production analysis.

🎯 Exam Tip: When listing characteristics, focus on its nature as a technical input-output relationship and its application within a defined time frame.

 

Question 10. What do you mean by scale?
Answer: Scale can mean a particular unit of measurement, like a meter, liter, kilogram, or hectare. These units are used to quantify inputs or outputs in production. Using a clear scale is essential for accurate economic calculations.

🎯 Exam Tip: Define 'scale' as a unit of measurement that helps quantify various aspects of production, such as quantity, volume, or area.

 

Question 11. What do you mean by “Return to Scale"?
Answer: French Economist Prof. Turgot.
In simple words: The concept of "Return to Scale" describes how output changes when all inputs are increased by the same percentage. However, this specific answer attributes the term to an economist, which is a different aspect.

🎯 Exam Tip: Be precise when answering about economic concepts. While Turgot was an economist, "Return to Scale" describes the proportional change in output from an equiproportional change in all inputs.

 

Question 13. State two types of production function.
Answer: Two types of production functions are:
1. Cobb-Douglas production function
2. Linear-Homogenous production function.
These are common mathematical models used to represent how inputs combine to produce output.

🎯 Exam Tip: When asked for types of production functions, listing well-known models like Cobb-Douglas or Linear-Homogenous demonstrates specific knowledge.

 

Question 14. What is the use of production function in economics?
Answer: In economics, the production function is used to help make decisions for the best possible production level. To do this, information about different ways of producing any goods and services is necessary. It guides firms in choosing the most efficient combination of inputs. It helps in understanding resource allocation.

🎯 Exam Tip: Focus on the decision-making aspect: production functions help firms optimize output and choose efficient input combinations.

 

Question 15. State one difference between short-term and long-term production function.
Answer: In the short-term, the ratio of fixed and variable factors changes as production changes. However, in the long-term, all factor inputs can be varied, so their proportions can be adjusted freely. This flexibility is a key distinction between the two periods.

🎯 Exam Tip: A core difference is the flexibility of inputs: only variable inputs can change in the short-term, but all inputs can change in the long-term.

 

Question 16. How is the supply of fixed means of production in the short term?
Answer: In the short-term, the supply of fixed means of production (like factory buildings or heavy machinery) is inelastic. This means their quantity cannot be easily changed in a short period. Businesses must work with their existing fixed assets. Their availability does not readily respond to changes in demand.

🎯 Exam Tip: Remember that "inelastic" supply for fixed factors in the short term means their quantity cannot be adjusted quickly, regardless of changes in production needs.

 

Question 19. How can indicators of production function be written?
Answer: Indicators of a production function can be written as:
P = F (L, K, Ld, M, T, C)
Where:
P = production function
F = Function
L = Labour
K = Capital
Ld = Land
M = Management
T = Technology
C = Courage or Entrepreneurship.
This formula shows all the key inputs that contribute to production. Each element represents a distinct factor of production.

🎯 Exam Tip: When presenting the formula for a production function, always list and define all the variables (inputs) included, such as labor, capital, and technology.

 

Question 20. Which production function is considered to be the most important among different production functions?
Answer: The Cobb-Douglas production function is often considered to be the most important among different production functions. It is widely used in economics to represent the technological relationship between the amounts of two or more inputs (like capital and labor) and the amount of output that can be produced. Its simplicity and robust properties make it very popular for analysis.

🎯 Exam Tip: Recognize the Cobb-Douglas production function as a highly influential model in economics due to its analytical convenience and widespread applicability.

 

Question 21. Cobb-Douglas production function was rendered by whom?
Answer: This production function was developed by Prof. C. W. Cobb and P.H. Douglas. Their work provided a significant tool for understanding production relationships in economics. Their model remains a cornerstone of economic theory.

🎯 Exam Tip: Remember the names of the economists, C. W. Cobb and P.H. Douglas, who are credited with developing this important production function.

 

Question 22. The concept of Production Function is the subject of which economics?
Answer: The concept of Production Function is a subject of static economics. This is because, under this concept, factors like the cost of factors, the level of technical knowledge, and the time period are all assumed to be constant. This simplified view helps in analyzing specific economic relationships without dynamic complexities.

🎯 Exam Tip: State that the production function falls under static economics because it assumes factors like technology and time are held constant for analysis.

 

Question 24. The commodity that is produced by a firm is known by what name in economics?
Answer: In economics, the commodity produced by a firm is known as "Output". This refers to the final goods or services that are created using various inputs. It is the result of the production process. Output can be anything from manufactured goods to services provided to consumers.

🎯 Exam Tip: Clearly define "output" as the final product or service created by a firm, distinguishing it from the "inputs" used in production.

 

Question 25. The means through which production is done is known as what in economics?
Answer: In economics, the resources used to perform production are known as "Inputs". These are the raw materials, labor, capital, and other elements a firm uses to create its output. Inputs are essential for any manufacturing or service delivery process.

🎯 Exam Tip: Understand that "inputs" are the resources or factors of production (like land, labor, capital) used to create an "output."

RBSE Class 12 Economics Chapter 6 Short Answer Type Questions

 

Question 1. State the meaning of “Function”.
Answer: In mathematics, "function" is a technical term that describes a quantitative relationship between two variables: an independent variable and a dependent variable. For example, in \( y = f(x) \), \( y \) is the dependent variable that relies on the independent variable \( x \). This means the value of \( y \) is determined by the value of \( x \), showing a precise mathematical connection. This concept is fundamental to modeling relationships in various fields, including economics.

🎯 Exam Tip: Define "function" as a mathematical concept showing a quantitative dependency between variables, where one variable's value is uniquely determined by another's.

 

Question 2. State the definition of Function in words of Alfa. C. Chiang.
Answer: According to Alfa. C. Chiang, a "Function" is a specific combination of variables, both independent and dependent, presented in an ordered way. The special thing about this type of function is that for any given value of X (the independent variable), there will always be one unique value of Y (the dependent variable). This definition emphasizes the deterministic nature of a function. It is a fundamental concept in mathematical economics.

🎯 Exam Tip: When quoting a definition, ensure accuracy and highlight the key idea, which in Chiang's definition is the unique output (Y) for every input (X).

 

Question 4. State the difference between short-term and long-term production function.
Answer:
Short-term: The short-term is a period in which some production factors are fixed, while others can be changed. Fixed factors have fixed costs, and variable factors have variable costs.
Long-term: The long-term, or long period, is when all factors of production or inputs can be changed. In the long-term, all inputs become variable, which means the company's production scale can be changed by adding new equipment and hiring more labor and other resources.
In the short-term, the ratio of fixed and variable factors keeps changing as production levels vary. On the other hand, in the long-term, all factor inputs can be adjusted, allowing for a complete reconfiguration of production resources. This distinction is crucial for understanding how businesses adapt to market conditions over different time horizons.

🎯 Exam Tip: The core difference lies in the flexibility of factors: some inputs are fixed in the short-term, whereas all inputs are variable and adjustable in the long-term.

 

Question 5. State five types of Production Function.
Answer: Here are five types of Production Function:
(a) Linear Homogenous Production Function
(b) Cobb-Douglas Production Function
(c) Input-Output Production Function
(d) Activity analysis Production Function
(e) Transcendental - Logarithmic Production Function.
Each of these models offers a different way to understand the relationship between inputs and outputs. They provide various mathematical frameworks for economic analysis.

🎯 Exam Tip: List a variety of production function types to show breadth of knowledge, including both common (Cobb-Douglas) and more specialized ones.

 

Question 6. What is the significance of production function?
Answer: The production function is not just about economics; it's also related to engineering. It is significant because it provides essential information for making decisions about the best way to produce goods. By comparing different possible production functions for any goods or services, we can get the desired results. This comparison allows for a proper understanding of the ideal combination of production resources. It acts as a guide for firms to achieve maximum efficiency and output.

🎯 Exam Tip: Emphasize that the production function's significance lies in its ability to aid in optimal production decisions and conceptualizing ideal resource proportions.

 

Question 7. What do you mean by short-term production period?
Answer: A short-term production period is when a firm can only change its variable factors of production, while its fixed factors remain constant. This means that while things like raw materials or labor can be adjusted, large assets like buildings or machinery cannot be changed in the short run. During this period, a business can alter its output level by varying only these flexible inputs, but it cannot change the overall size or scale of its operations. Understanding the short-term helps businesses decide how much to produce immediately without making big, long-term investments.
In simple words: In the short-term, a company can only change how much it uses of some things (like workers or raw materials) but not big things (like factories). It can change production amount, but not the overall size of its business.

🎯 Exam Tip: Remember that in the short-term, at least one factor of production is always fixed, which is key to understanding its characteristics.

 

Question 8. What do you mean by long-term Production Function?
Answer: A long-term production function refers to a period where all factors of production, or inputs, can be changed. This means a company has enough time to adjust all its resources, including buildings, machinery, and labor, not just the variable ones. Businesses can change the entire scale of their operations by setting up new facilities, buying new equipment, and hiring more workers. The long-term perspective allows for strategic planning and significant expansion or contraction of a business.
In simple words: In the long-term, a company can change everything it uses for production, including its factory size. It means they can grow or shrink their business completely.

🎯 Exam Tip: The crucial aspect of the long-term is that all inputs are variable, allowing for a complete adjustment of the production scale.

 

Question 9. What do you mean by "Returns to Outlay"?
Answer: "Returns to Outlays" describes what happens to production when the money spent (outlays) on different factors of production changes by different amounts or percentages. It helps us understand how varying the investment in different inputs affects the total output of goods. This concept is crucial for businesses to optimize their spending on inputs to achieve desired production levels.
In simple words: "Returns to Outlays" is about how much more you produce when you spend different amounts of money on things like materials or workers.

🎯 Exam Tip: Distinguish "Returns to Outlays" from "Returns to Scale" by remembering that outlays allow for varying proportions of input changes.

 

Question 10. "Production has a definitive technique". Explain this assumption of production function.
Answer: One key assumption of a production function is that the production technique should remain fixed and not change. This is important because the amount of goods produced depends not only on the quantity of inputs but also on the specific production methods used. For example, using better technology leads to more output, even with the same amount of inputs. If the technology is poor, production can drop even if inputs stay the same. Therefore, by keeping the technique constant, we can clearly see how changes in the amount of inputs affect the production level. This assumption helps economists isolate the impact of input changes on output, simplifying analysis.
In simple words: A production function assumes the way things are made (the technique) does not change. This helps us see how changing materials or workers affects how much is made, without technology confusing things.

🎯 Exam Tip: When explaining assumptions, always clarify why that assumption is necessary for the economic model or function.

 

Question 11. "Production function is cost independent”. Explain.
Answer: The statement "Production function is cost independent" means that a production function focuses solely on the physical quantities of inputs and outputs. It describes the technical relationship-how much physical output can be produced from a certain amount of physical inputs. This function does not directly consider the market price of the goods produced or the cost of the inputs used. However, while the function itself is technical, a producer always thinks about prices and costs when making real-world decisions about how much to produce and what inputs to use. This distinction highlights that the production function describes technical possibilities, while economic decisions involve monetary considerations.
In simple words: "Production function is cost independent" means it only looks at how many goods are made from how many materials, not how much those materials or goods cost. But in real life, a business owner still thinks about prices.

🎯 Exam Tip: Remember that cost independence in production function refers to the physical relationship, not the actual business decision-making process.

 

Question 13. Why is Production Function considered as a subject of static economics ?
Answer: The production function is considered a part of static economics. This is because, in the theories of the production function, certain key elements are assumed to be fixed or unchanging. These fixed elements include the cost of the production inputs, the current level of technical knowledge, and the specific time period being studied. Because these factors are held constant, the production function analyzes a snapshot in time rather than changes over time, making it a static concept rather than dynamic. Static analysis simplifies complex economic realities by isolating variables for clearer examination.
In simple words: The production function is static economics because it assumes things like costs, technology, and time stay the same. It looks at a fixed picture, not how things change over time.

🎯 Exam Tip: Clearly state the assumptions (fixed cost, technology, time) that make the production function a static concept.

 

Question 14. What do you mean by long-term Production function?
Answer: A long-term production function examines how the quantity of production changes when the amounts of all production inputs are varied. In the long run, businesses have enough time to adjust every factor, from raw materials and labor to machinery and factory size. Therefore, when discussing the long-term, the economic principle known as the "law of returns to scale" is applied, which studies how output changes when all inputs are scaled up or down together. This contrasts with the short-term, where only some factors can be changed, leading to the law of variable proportions.
In simple words: A long-term production function studies how total production changes when a business can change all its inputs, like materials, workers, and factory size. This is where we use the "law of returns to scale."

🎯 Exam Tip: Always link the long-term production function to "returns to scale" as it's a key concept in this context.

 

Question 15. State the difference between Returns to Scale and Returns to outlays.
Answer: The main difference between "Returns to Scale" and "Returns to Outlays" lies in how the factors of production are combined. In "Returns to Scale," all inputs are increased or decreased in the same fixed proportion, so their relative combination ratios stay constant. For instance, if labor and capital are doubled, they are both doubled. However, in "Returns to Outlays," the proportions in which inputs are combined can change; factors might be varied by different amounts or percentages, altering their ratios. This distinction helps economists analyze different ways firms adjust their production process in response to costs and output goals.
In simple words: "Returns to Scale" means you change all production parts by the same amount, keeping their mix constant. "Returns to Outlays" means you can change different parts by different amounts, so their mix changes.

🎯 Exam Tip: Focus on the constancy of input ratios for "Returns to Scale" versus the variability of input ratios for "Returns to Outlays."

 

Question 16. Why are the law of returns variable proportions and law of diminishing marginal production considered the same?
Answer: Today, many economists view the "law of returns to variable proportions" and the "law of diminishing marginal production" as essentially the same concept. This is because both laws describe what happens to output when some inputs are kept fixed while others are varied. As variable inputs are added to fixed inputs, the ratio between the factors of production changes. This change affects the output, leading to stages of increasing returns, followed by constant returns, and eventually, diminishing returns, where each extra unit of variable input adds less and less to total production. This unified view simplifies the analysis of production decisions in the short-run, where at least one factor is fixed.
In simple words: Economists now see the "law of variable proportions" and "law of diminishing returns" as the same. They both show how production changes when you add more of one thing (like workers) to a fixed thing (like a factory), first increasing, then slowing down.

🎯 Exam Tip: Explain that both laws apply to the short run, where varying one input while others are fixed causes changes in output efficiency.

 

Question 17. How are fixed factors of production typically denoted or represented in relation to variable factors in a short-term production function?
Answer: In a short-term production function, only labor is considered a variable factor, meaning its quantity can be changed. All other factors, such as land or capital, are considered constant or fixed. In diagrams or economic models, these fixed factors are often represented with a specific notation, such as a bar or line drawn above their symbols, to indicate that their quantity remains unchanged in the short run. This visual convention helps to quickly identify which inputs are adjustable and which are not in a given production scenario.
In simple words: In a short-term production plan, things that cannot be changed (fixed factors) are often shown with a line over them, while things that can be changed (like workers) are not.

🎯 Exam Tip: When analyzing diagrams, recognize that a line above a factor symbol often indicates a fixed input in the short-term.

 

Question 18. Show the status of the production function of variable proportions using a table.
Answer: Here is a table demonstrating the production function with variable proportions, showing how total production changes when varying one input (labour) while keeping another (land) fixed.

The table clearly shows that the amount of land remains constant, while only the labor input is varied. As the amount of labor changes, the total production also changes. This results in the ratio between the fixed factor (land) and the variable factor (labor) constantly changing as more labor is added. This variation in proportions leads to changes in total output. This table illustrates the classic "law of variable proportions" where initial increases in variable input lead to greater output, but eventually, diminishing returns set in.
In simple words: This table shows how production changes when you keep one thing fixed (land) and change another (workers). As you add more workers to the same land, the total goods produced will change, and the mix of land to workers keeps shifting.

🎯 Exam Tip: When presenting tables, ensure all columns are clearly labeled and the data accurately reflects the concept being demonstrated.

 

Question 19. Show the status of the production function of fixed proportions using a table.
Answer: Here is a table showing the production function with fixed proportions, where inputs are combined in a constant ratio:

From this table, it is evident that in the long term, changes in inputs are made in equal proportion. This means the mutual ratio of inputs remains the same as before, indicating that all inputs are scaled up or down together, maintaining their fixed proportion in the production process. Production functions with fixed proportions are common in processes where inputs are highly complementary, like a specific machine requiring exactly one operator.
In simple words: This table shows that in the long run, when you change how much of each input you use, you change them all by the same amount. This keeps their mix exactly the same as before.

🎯 Exam Tip: Highlight that fixed proportions imply inputs are used in a constant ratio, often due to technical requirements.

 

Question 20. Is means of long-term production function, highlighted with a straight line in the formula?
Answer: In a long-term production function, all inputs are considered variable, meaning none of them are fixed or static. Because there are no fixed factors in the long run, there is no need to highlight any input with a straight line drawn above its symbol in the formula. The general formula for a long-term production function, such as \( P = f (L, Ld, K, T, E) \), includes all factors as variable. This contrasts with short-term functions where fixed factors are often denoted with a bar to indicate their unchangeable nature.
In simple words: In the long-term production function, everything can change, so nothing is fixed. That's why we don't draw a line above any input in its formula.

🎯 Exam Tip: Remember the notation for fixed factors (often a bar over the variable) is absent in long-term production functions because all factors are variable.

Rbse Solutions For Class 12 Economics Chapter 6 Essay Type Questions

 

Question 1. State the difference between short-term and long-term production function.
Answer: Here are the main differences between short-term and long-term production functions:
1. The short-term production function follows the law of variable proportions, where some inputs are fixed and others are changed. In contrast, the long-term production function follows the law of returns to scale, where all inputs are varied proportionally.
2. In the short-term function, some inputs are fixed (static), and some are variable because businesses do not have enough time to change every factor. However, in the long-term function, all inputs can be changed (varied) because firms have sufficient time to adjust all their resources.
3. The short-term production function is considered more realistic and observable in practice, as businesses often operate with some fixed constraints. The long-term production function is more of a theoretical concept, representing a planning horizon where all adjustments are possible. Factors are actively managed in the short term due to the fixed-variable input structure, while in the long run, they are adjusted for internal and external cost efficiencies. Understanding these distinctions helps businesses make both immediate operational decisions and long-range strategic plans.
In simple words: Short-term production means some things are fixed (like factories) and others can change (like workers). Long-term production means everything can change. Short-term looks at variable proportions, long-term looks at returns to scale. The short-term is more like real life; the long-term is more like a plan for the future.

🎯 Exam Tip: When comparing short-term and long-term production, always highlight the key difference: the variability of all inputs in the long-term versus some fixed inputs in the short-term.

 

Question 2. State the definition of production function and also state its characterstics.
Answer: A production function shows the technical connection between what goes into making something (inputs) and what comes out (production). It explains how much output can be made from different amounts of inputs.
Here are some definitions by economists:
1. **Henderson and Quandt:** They see the production function as an engineering idea that explains the link between inputs and outputs. It focuses on quantities and assumes technology stays the same.
2. **Dr. Balwant Kandoi:** If 'Q' is the quantity produced and 'Ld, L, K, O, T' are inputs like land, labor, capital, management, and technology, then the production function is written as \( Y = f (Ld, L, K, O, T) \).
3. **N. Gregory Mankiw:** He defines it as the relationship between the physical quantity of production factors (inputs) and the quantity produced (output).
4. **Watson:** For him, it's the relationship between a firm's physical production (output) and the material factors of production (inputs) necessary to produce it.
Simply put, a production function is the physical link between inputs and outputs.

General Characteristics of Production Function:
1. **Cost Independent:** The production function deals only with the physical amounts of production. It doesn't directly consider the market price of goods or the cost of inputs. Even though producers think about prices, the function itself is about physical quantities.
2. **Time Dependent:** It is understood within a specific time period. If the time period changes, the function loses its meaning, making it a time-dependent concept.
3. **Substitution Possibilities:** The production function allows for the idea that different inputs can be substituted for each other. For example, capital might be used instead of labor to achieve the same output.
4. **Complete Divisibility of Means:** It assumes that inputs can be divided into smaller units, meaning any factor of production can be adjusted in size.
5. **Definite Given Technique:** The production function relies on a fixed, unvarying production technique. This means that changes in output are due to changes in input amounts, not changes in how things are made. If the technique improves or worsens, production changes independently of input levels.
6. **Subject of Static Economics:** It falls under static economics because it assumes input costs, technology levels, and the time frame are all constant. It analyzes a fixed situation rather than dynamic changes.
7. **Short-term or Long-term:** Production functions are categorized as short-term or long-term based on the time period. In the short term, the ratio of variable and fixed inputs changes with production, while in the long term, all input ratios can be adjusted equally.
Production functions are fundamental tools in microeconomics, helping firms understand their efficiency and capacity limits under different conditions.
In simple words: A production function shows how many goods you can make from your materials and workers. It has fixed definitions by experts and specific features like not caring about money costs, being tied to a time period, letting you swap materials, assuming inputs can be split, using a set way of making things, and being either short-term or long-term.

🎯 Exam Tip: When defining and listing characteristics, use clear headings or bullet points for readability and ensure each point is distinct and well-explained.