ABSTRACT
This chapter focuses on the economic activity of production: the conversion of resources into goods and services. In the business sphere, one of the goals of production is to make a profit. But the generation of profit is not the only goal pursued by businesses. Many companies balance social and environmental objectives with profit-making. Economic analysis of production has tended to emphasize the objective of profit-making. Economists think of production more broadly, including any activity involved in the conversion of resources into final goods and services. The production costs that Gail can easily adjust are called variable costs. Variable costs can be adjusted relatively quickly in response to changes in market conditions, production targets, or other circumstances. Actual production decisions are often a matter of trial and error. Firms might experiment with different levels of various inputs to determine which production processes are the least costly.
