Technology- the processes a firm uses to turn inputs into outputs of goods and services. Technological change- a change in the ability of a firm to produce a given level of output with a given quantity of inputs. Basic activity of a firm: use inputs (workers, machines, natural resources) to produce outputs (goods and services. Short run- the period of time during which at least one of a firm"s inputs is fixed (some limitation) Long run- the period of time in which a firm can vary all its inputs, adopt new technology and increase or decrease the size of its physical plant (everything"s a variable) Total cost- the cost of all inputs a firm uses in production. Total cost = fixed cost + variable cost. Variable costs- costs that change as output changes. Fixed costs- costs that remain constant as output changes. Opportunity cost- the highest-valued alternative that must be given up to engage in an activity.