• Differentiate between production in the short run and in the long run

• Differentiate between total and marginal product

• Understand the concept of diminishing marginal productivity

In this chapter, we want to explore the relationship between the quantity of output a firm produces, and the

cost of producing that output. We mentioned that the cost of the product depends on how many inputs are

required to produce the product and what those inputs cost. We can answer the former question by looking at

the firm’s production function.

FIGURE 7.3 The production process for pizza includes inputs such as ingredients, the efforts of the pizza maker, and

tools and materials for cooking and serving. (Credit: “Grilled gluten-free BBQ chicken pizza” by Keith McDuffee/

Flickr, CC BY 2.0)

Production is the process (or processes) a firm uses to transform inputs (e.g., labor, capital, raw materials) into
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