Production creates the supply of goods and services that satisfy needs and wants. Economists study production using production functions and by distinguishing periods as short-run or long-run. Short-run refers to a period with at least one fixed input, while long-run permits altering all inputs. A businessman will operate if total revenue exceeds variable costs and shut down if total revenue is less than variable costs.

2. Production refers to the output of goods
and services produced by businesses within
a
market. This production creates the supply
that
allows our needs and wants to be
satisfied. To simplify the idea of the
production function, economists create a

3. The specification of production time
periods is
a convenient way to understand and explain
production activity by a firm, which then
provides insight into market supply. The
standard
distinction is generally between short
run, and

4. 

5. • Fixed Costs
The cost of production of the
investment utilized by the firm.
The fixed cost does not vary
regardless of the production
output. These are overhead cost,
rent of offices and buildings,
property tax, amortization and
interest.

6. • Variable Cost
This indicates cost of
the direct labor, raw
materials, supplies and
materials. The variable
cost is associated in the
production of goods.

8. Short run refers to a period of
time which is too short to allow
an enterprise to change its, plant capacity,
yet along enough to allow a change.
The short run is a period of
time when there is at least one
fixed factor input.

9. •Fixed Input: A fixed input is
an input used in production
and under the control of the
producer that does not
change during the time
period of analysis (the short
run).

10. •Variable Input: A variable
input is an input used in
production and under the
control of the producer that
does change during the time
period of analysis (the short
run).

11. What conditions would a businessman
operate or shut down his firm?
The rule is: if total revenue is greater than
variable cost, operate; if total revenue is
less than variable cost, shut down.
Total revenue = PxQ (Price times units sold)
Total revenue – total cost = profit

12. Long run refers to a period of
time which is long enough to
permit
a firm or enterprise to alter all
its resources or inputs. In the
long
run, all of the factors of
production
can change giving a business
the opportunity

13. Rule:
TR > TC: Produce more
TR < TC: Stop production
TR = TC: Maintain production