cook? What is the best oven to use? Gas or wood burning? Should the restaurant make its own dough,

sauce, cheese, toppings, or should it buy them?

• Entrepreneurship – Production involves many decisions and much knowledge, even for something as

simple as pizza. Who makes those decisions? Ultimately, it is the entrepreneur, the person who creates the

business, whose idea it is to combine the inputs to produce the outputs.

The cost of producing pizza (or any output) depends on the amount of labor capital, raw materials, and other

inputs required and the price of each input to the entrepreneur. Let’s explore these ideas in more detail.

We can summarize the ideas so far in terms of a production function, a mathematical expression or equation

that explains the engineering relationship between inputs and outputs:

The production function gives the answer to the question, how much output can the firm produce given
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