Theory of Production

This textbook offers a rigorous yet accessible exploration of production theory and partial equilibrium, extending well beyond the scope of standard microeconomic texts. Designed for students at both undergraduate and graduate levels, it integrates classical insights with modern analytical tools to deepen their understanding of production and price theory. In addition to covering foundational topics, this book introduces lesser-known but highly significant concepts often omitted in mainstream curricula. Readers will encounter Böhm-Bawerk’s marginal pairs, the idea of perfect competition as full appropriation, and the elusive notion of roundaboutness. Further chapters explore the inverse problem of costs, the medium-run supply curve, and the decentralization of the transportation problem, culminating in a discussion of Menger’s Law—a powerful principle at the heart of Austrian economics. A unique feature of the book is its sustained focus on shadow prices, offering students thorough training in interpreting and applying this crucial concept across a range of economic settings.