Microeconomics: Theory and Applications with Calculus, 4e

6.2 Production

A firm uses a technology or production process to transform inputs or factors of production into outputs. Firms use many types of inputs, most of which fall into three broad categories:

• Capital services (K): use of long-lived inputs such as land, buildings (such as factories and stores), and equipment (such as machines and trucks)

• Labor services (L): hours of work provided by managers, skilled workers (such as architects, economists, engineers, and plumbers), and less-skilled workers (such as custodians, construction laborers, and assembly-line workers)

• Materials (M): natural resources and raw goods (such as oil, water, and wheat) and processed products (such as aluminum, plastic, paper, and steel) that are typically consumed ...