To explain variations in managerial performance, we need to know something about what can and cannot be produced using different production technologies. In this book, a production technology (or simply ‘technology’) is defined as a technique, method or system for transforming inputs into outputs. For most practical purposes, it is convenient to think of a technology as a book of instructions, or recipe. In this book, the set of technologies that exist in a given period is referred to as a technology set. If we think of a technology as a book of instructions, then we can think of a technology set as a library. The input-output combinations that are possible using different technologies can be represented by output sets, input sets and production possibilities sets. Under certain conditions, they can also be represented by distance, revenue, cost and profit functions. This chapter defines, and discusses the properties of, these different sets and functions.
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