In the theory and practice of the firm，we start with（he basic facts of tbe need of thefirm to combine itS resources into a product or a service。The resources are！and，labor,and capital，and entrepreneurial ability.Thelatter suggests this task of tom.bining resources with some“taking”or assuming of risks.The firm or entrepreneurneeds to be innovative and able to adjust to changing technology,labor supply,andnew sources of funding capital projects including venture capital,Microeconomics isreally the economics of the firm，the出eory of the firm，or price Chcory Before a firmcan engage resources in any effective manner,it needs to know basic production con.cepts such as the relationship between resources（also known as inputs，factors ofpro.duction，or agents of production）and output。This iS the basic production functionThe distinction between the short run and the long run iS significant in economics.It iS not the difference declared by a student；the student posited that a long run Wasany run over one mile in distance.In economics.the distinction iS that in the shortrun，supply cannot fully adjust to changes in demand.In the long run，supply doesfully adjust to changes in demand，The law of diminishing marginal productivity isa short run phenomenon.
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