The correct answer is A. Both 1 and 2.
A production function is a mathematical relationship that shows the maximum amount of output that can be produced from a given amount of inputs. The inputs can be labor, capital, land, or any other resource that is used in the production process.
The main characteristics of the inputs that affect the production function are substitutability, complementarity, flexibility, and specificity.
Substitutability refers to the ability to substitute one input for another. For example, if the price of labor increases, firms may substitute capital for labor.
Complementarity refers to the fact that some inputs are used together in the production process. For example, labor and capital are complementary inputs in the production of goods.
Flexibility refers to the ability to change the mix of inputs in response to changes in prices or technology.
Specificity refers to the fact that some inputs are more specialized than others. For example, a machine that is used to produce a particular product is a more specific input than a machine that can be used to produce a variety of products.
In conclusion, the production function is based on the characteristics of the inputs, including substitutability, complementarity, flexibility, and specificity.