Briefly explain the concept of the cost function.
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A cost function is a mathematical formula used to used to chart how production expenses will change at different output levels. In other words, it estimates the total costof production given a specific quantity produced.
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Concept of the cost function:
A ‘cost function’ is a method of determining the manner in which the expenses of production will change at different levels of output levels. Which means it establishes the ‘total cost of production’ when a specific quantity of output is produced.
Economists use this method for determining different stages of production which helps to predict what the total cost would be to produce a product at different levels of output. This helps the management of the organization to work on their budgets.
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