Microeconomics

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Basics of the Production Function

MICRO-ZAVEQK

Working with production functions with two factor inputs, and the corresponding isoquants (the set of points at which the same quantity of the good is produced while changing the quantity of the two inputs) will be very much like your experience with utility functions and indifference curves – you could think of production functions as the utility of firms (or you could think of utility functions as producing happiness for individuals).

Unlike utility functions and indifference curves, where the two goods consumed can vary greatly, however, production functions typically stick with two-factor​ inputs for production: labor ($L$) and capital ($K$). Based on the production function $q(L,K) = LK$, complete the following table:

L K q(L,K)
2 2 [a]
2 [b] 6
[c] 3 9