Question

Dave’s Dogs is a firm that originally sold hotdogs and soft drinks from a cart located in front of City Hall. Then Dave purchased another hotdog cart and hired someone to sell hotdogs and soft drinks near the high school. Both locations have been successful. When Dave’s Dogs expanded to two locations, which of the following did NOT occur?

A) Dave's production function changed.
B) Production increased.
C) The company increased the inputs it employs.
D) The firm employed additional capital.

Answer 1

Answer:

The answer to this question is Option A. Dave's production function change

Explanation:

production function refers to the functional relationship between the quantity of a good produced (output) and factors of production (inputs).

The expansion of Dave's Dogs will cause its production function to change as a result of increase in the quantity of goods produced and an increase in the factors of production employed.  

Hence the answer is A. Dave's production function change

Answer 2

Answer:

A) Dave's production function changed.

Explanation:

When Dave expanded his hot dog business, his production function didn't change at all. The production function shows the relationship between the amount of inputs used and total output, its basically a math equation.

In order for the production function to change, the proportion of capital and labor must change. But in this case, total output will double because the amount of labor and carts will double, not because productivity increases.

The production function changes only when productivity changes.