Shortrun And Longrun Costs

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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