The firm produces a single good 2. The firm has already chosen which product to produce 3. The firm's goal is to minimize the cost of producing it 4. The firm uses only capital and labor to make its product 5. In the short run, a firm can only choose labor; In the long run, the firm can freely choose both labor and capital it employs 6. The more inputs the firm uses, the more output it makes 7. Diminishing marginal returns to labor and capital 8. The firm can buy as many capital or labor inputs as it wants at fixed market prices 9. If there is a well functioning capital market, the firm does not have a budget constraint