Every business, from a lemonade stand on the corner to a giant car factory, faces the same puzzle: how much should we produce, and what will it cost? This chapter unfolds that puzzle. We will look at what a firm puts in—workers, machines, raw materials—and what it gets out, and we will see how its costs change as it makes more. By the end, you will understand why a firm’s average cost curve has its familiar U-shape and what “efficient scale” really means.