Q.Explain what a production function is, and distinguish between the short run and the long run in production analysis.

The long run is defined as the period in which all inputs can be varied, so every factor of production is variable. Answer: (a) All factors of production are variable.

In production theory the distinction between short run and long run is based on which factors can be changed:

• In the short run, at least one factor (typically plant, machinery or land) is fixed, and output can be varied only by changing the variable factors (labour, raw materials). This is the setting for the Law of Variable Proportions.
• In the long run, the time horizon is long enough that the firm can adjust every input — it can build new plant, install more machinery, acquire more land, and hire more labour. Therefore all factors of production are variable and there are no fixed factors. This is the setting for returns to scale.

So option (a) is correct; (b), (c) and (d) describe fixed or partly fixed situations that belong to the short run.

This is a core production-concept item from the Production and Cost Analysis unit of the CHSE Odisha +2 Class-12 Commerce Business Economics paper.

The statement is incorrect; land is a fixed factor. Correct statement: 'Land is a fixed factor.'

In production theory, factors are described as fixed or variable depending on whether their quantity can be changed in the given time period.

Land, in economics, means all free gifts of nature (soil, minerals, water, natural forces). Its distinguishing features are that it is a gift of nature, its total supply is fixed and cannot be increased or decreased by human effort, and it is passive and immobile. Because its supply cannot be varied at will, land is classified as a fixed factor of production. (A variable factor, by contrast, is one such as labour or raw materials whose quantity can be readily increased or decreased.)

The statement calling land a variable factor is therefore wrong; keeping the underlined subject 'Land', the predicate must be corrected to 'fixed factor'.

The correct answer is (a) Creation of utility having exchange value.

This is a foundational production concept in CHSE Odisha +2 Business Economics.

• Creation of matter (c) is wrong — no one can create or destroy matter; man can only change its form or place.

• Satisfaction of human wants (b) describes consumption, not production.

• Making factors more productive (d) is only one aspect (efficiency), not the definition of production.

• Creation of utility having exchange value (a) is the correct economic meaning: production is any activity that creates or adds utility — form utility, place utility, time utility, service utility — to things so that they can satisfy wants and command value in exchange.

The statement is incorrect; in the long run all factors of production are variable, not fixed.

This is a correct-the-statement item in CHSE Odisha +2 Business Economics, keeping the underlined part — 'In the long run all factors of production are' — unchanged.

• In the short run, at least one factor (usually plant/capital) is fixed while others vary; this gives rise to the Law of Variable Proportions.
• The long run is, by definition, a period long enough for the firm to adjust all inputs, including plant size. Therefore every factor is variable in the long run, which is why returns to scale (not variable proportions) apply there.

Hence 'fixed' must be corrected to 'variable'.