Conrad realises that production is cheaper in China and that robots might be the future, but he has ambitions for the old paper mill, which he inherited from his father. He is considering increasing production—in fact, doubling it! In production theory, we distinguish between the short run and the long run. In the short run, capital is fixed, which means the only way to expand output is by hiring more workers. In the long run, however, new capital equipment can be brought in, which opens new possibilities. We begin with the short-run perspective. How many workers are needed to increase production when the capital stock is fixed, and what does it cost? We’ll mainly use standard production functions, but also consider situations where there is perfect complementarity between inputs—implying that producers may face an absolute capacity constraint. We’ll also look at Conrad’s challenge of optimising production across different facilities, where marginal thinking becomes crucial. The chapter concludes with the long-run perspective, where all factors of production are variable.