Cost Functions as Fundamental Tools of Production Decision

Abstract

In today’s economy, cost functions are very important for making decisions in production. They show the connection between the quantity produced and the expenditure required to obtain the goods or services. These functions are current because firms face high competition, changing prices and limited resources. With their help, managers can more easily understand how much producton costs and how they can better use resources. The role of cost functions is to help choose the optimal level of production, reduce expenses and increase profit. They are also useful for setting prices and planning the company’s activities. In a constantly changing world, these tools help companies make correct and fast decisions. CZU: 338.512:005.311.6; JEL: D24, L11