Ch 2 · Theory of Production and Cost

📘 Core concepts

1. 1Production function: Q = f(L, K) — relates output to inputs.
2. 2Law of Variable Proportions: as one input increases, marginal product rises then falls.
3. 3Returns to scale: increasing / constant / decreasing.
4. 4Fixed cost independent of output; variable cost changes with output.
5. 5Short-run: at least one input fixed. Long-run: all inputs variable.