Production functions: short and long run
The relationship between the quantity of inputs a
firm uses and the quantity of output it produces.
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.
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: