long run. A firm can build new factories and purchase new machinery, or it can close existing facilities. In

planning for the long run, the firm will compare alternative production technologies (or processes).

In this context, technology refers to all alternative methods of combining inputs to produce outputs. It does not

refer to a specific new invention like the tablet computer. The firm will search for the production technology

that allows it to produce the desired level of output at the lowest cost. After all, lower costs lead to higher

profits—at least if total revenues remain unchanged. Moreover, each firm must fear that if it does not seek out

the lowest-cost methods of production, then it may lose sales to competitor firms that find a way to produce

and sell for less.

Choice of Production Technology

A firm can perform many tasks with a range of combinations of labor and physical capital. For example, a firm
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