Jonathan Gruber continues building producer theory in this MIT Principles of Microeconomics lecture, working toward where the supply curve comes from. He walks through short-run cost curves, distinguishing fixed and variable costs, then contrasts short-run and long-run production decisions, showing how firms can adjust more inputs over longer horizons. The lecture covers how to measure costs in practice, including average and marginal cost, and how these curves shape a firm's output decisions. Gruber uses the blackboard to build cost curves step by step, connecting the math back to the underlying production function from prior lectures. The session is part of MIT's 14.01 course, Fall 2023, and assumes familiarity with the production concepts introduced earlier in the term. It ends with the groundwork needed for deriving a competitive firm's supply curve in the next lecture.