cost function Proper use of relevant cost concepts requires an understanding of the relation between cost
The cost-output relation and output, or the cost function. Two basic cost functions are used in managerial decision short-run cost functions
Basis for day-to-day operating decisions long-run cost functions
Basis for long-range planning short run
Operating period during which at least one input is fixed long run
Planning period with complete input flexibility making: short-run cost functions, used for day-to-day operating decisions, and long-run cost functions, used for long-range planning.
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