On Teaching Production Theory: Integrating Short-Run and Long-Run Analyses

The microeconomic theory of production is typically presented to undergraduates in a way that leaves many students with a disjointed view of the subject. The short run is described as one kind of world, in which the firm pursues one set of objectives, commonly identified as “optimal factor employment.” The long run, on the other hand, is depicted as a very different kind of world, in which the firm pursues a different set of objectives, known as “optimal factor combination.” The purpose of this essay is to bring together familiar diagrammatic tools in a way that allows instructors to integrate short-run and long-run principles of factor employment.