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PRODUCTION FUNCTION:
The relationship between the quantity of inputs a
firm uses and the quantity of output it produces.
SHORT RUN:
Firms can vary labor (not in a fixed contract) and raw materials.
In the short run managers can send workers home, fire workers or shut down the plant.
LONG RUN:
Firms can vary everything. Most importantly land, the physical plant and capital within the space.
In the long run, a firm can sell a plant and change its fixed costs.
ECONOMIC vs. ACCOUNTING PROFIT:
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