History and Social Science, Part 104

Question 1: Define production in depth.

Answer 1: The production function in microeconomics refers to the total process of producing or assembling goods and services that are to be traded in a marketplace. Production decisions are some of the most vital in microeconomics. A firm or individual must decide what to make, and how many units to provide. This will often depend on the method of production and the unit price of making each product. An evaluation on the necessary resources to be utilized in another important production decision.In tandem with sophisticated market research, optimum decisions can be made about producing goods and services.Production is a process, and as such it occurs through time and space. Because it is a flow concept, an important statistic is the amount of production for a specific period of time. Other factors of concern are the amount and physical dimensions of the finished process. This will be important in storing and shipping the finished goods.

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Question 2: Describe and discuss efficiency and x-efficiency.

Answer 2: The measurement of the productivity of a production process is vital. Productivity may be said to be efficient when the optimum number of finished products is produced with a minimum of raw materials, assuming quality control is maintained.If a production operation is less productive than anticipated, due to internal or external forces, it is said to be X-efficient.Such X-efficient production operations are often due to a number of factors beyond the control of the producer. Examples would be shortages of raw materials, increased and unexpected competition, or problems in the supply of necessary labor.The productivity of a production function is simply based on how many units of a finished product can be made from a minimum amount of inputs. The more efficient processes give firms an important competitive position and greater flexibility in pricing and marketing. Decisions made about production will often determine the success or failure of the product line for a firm.

Question 3: Describe some major factors of production.

Answer 3: Factors of production are the sum total of the resources needed to produce finished goods. The major factors identified by economists include the use of land ( for factories and agricultural products), labor, (the human work force), natural resources, (raw materials used in manufacturing), and capital goods, ( previously manufactured equipment used in production.) Human inputs such as management and human relations could be added to the mix. Contemporary economists often include technological expertise into the factors of production.Factors of production may be fixed (one which cannot be changed), or variable (one which can be adjusted by management easily). Examples of fixed factors would be physical plants, heavy machinery and key managerial personnel. A variable factor of production is one whose usage rate can be changed easily. In the “long run” all of these factors of production can be adjusted by management. The “short run” however, is defined as a period in which at least one of the factors of production is fixed.

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