* In short run = size of factory is fixed because it cannot be built overnight, but output can be varied by varying the number of workers * In long run = size of factory and number of workers can be varied * Production function: relationship b/w quantity of inputs used to make a good and the quantity of output of that good (short-run) * Marginal product = increase in output that arises from additional unit of input * MP = ∆TP/∆Q