Economics, 3rd Edition

the short run

, but not in 

the long run

. That is, Paolo cannot build 

a larger factory overnight, but he can do so within a year or so. This initial analysis, therefore, should be 

viewed as describing the production decisions that Paolo faces in the short run.

A Production Function and Total Cost: Paolo’s Pizza Factory

Number of 

workers

Output (quantity of 

pizzas produced per 

hour) or total product

Marginal 

product of 

labour

Cost of 

factory (

€)

Cost of 

workers (

€)

Total cost of inputs 

(cost of factory 

+ 

cost of workers) (

€)

0

    0

  0

30

  0

30

1

 

 

50

50

30

10

40

2

  90

40

30

20

50

3

120

30

30

30

60

4

140

20

30

40

70

5

150

10

30

50

80

TABLE 6.1

the short run

 the period of time in which some factors of production cannot be changed

the long run

 the period of time in which all factors of production can be altered

The Production Function

Table 6.1 shows how the quantity of pizzas Paolo’s factory produces per hour depends on the number of 

workers. As you see in the first two columns, if there are no workers in the factory Paolo produces no 

pizzas. When there is 1 worker he produces 50 pizzas. When there are 2 workers he produces 90 pizzas, 

and so on. Panel (a) of Figure 6.1 presents a graph of these two columns of numbers. The number of work-

ers is on the horizontal axis, and the number of pizzas produced is on the vertical axis. This relationship 

between the quantity of inputs (workers) and quantity of output (pizzas) is called the