While accounting profit considers only explicit costs, economic profit considers both explicit and implicit costs Production is the process a firm uses to transform inputs (e.g., labor, capital, raw materials, etc.) into outputs.

Thus, in the short run the only way to change output is to change the variable inputs (e.g., labor). Marginal product is the additional output a firm obtains by employing more labor in production.

production — the process of combining inputs to produce outputs, ideally of a value greater than the value of the inputs. short run — period of time during which at least one or more of the firm’s inputs is fixed. firm — an organization that combines inputs of labor, capital, land, and raw or finished component materials to produce outputs. implicit costs — opportunity cost of resources already owned by the firm and used in business, for example, expanding a factory onto land already owned.