1. Production Function A production function shows the functional relationship given by technology between a firm’s physical rates of input and its physical rates of output per unit of time. TPP = f ( a, b, c, … )

2. Characteristics of a Production Function t Production refers to the transformation of inputs into output; t A production function is a flow concept; t A production function is a physical, technological, or engineering concept, and yet it has an economic dimension to it; and t In production analysis, factors of production can be separated into fixed and variable factors.

3. Value Relationships t Value Total Product (TVP) VTP = TPP * P t Value Marginal Product (MVP) VMP = MPP * P t Marginal Revenue Product (MRP) MRP = MPP * MR t Marginal Factor Cost (MFC)

4. Functional Relationships in Value Terms