Briefly explain the concept of the cost function.
The cost function describes the least cost of producing each level of output given the prices of factors of production and technology. For every level of output, the firm chooses the input combination that is least expensive to produce the desired output.
The cost function illustrates the relationship between output levels and costs. Total Cost (TC) is the sum of Total Fixed Cost (TFC), which remains constant at all output levels, and Total Variable Cost (TVC), which increases as output increases. For instance, at zero level of output, the Total Cost is just the fixed cost.
Explanation
The answer is derived from the section '3.7 Costs' in the provided context. It defines the cost function as the least cost for each output level given factor prices and technology. Additionally, it incorporates the example from 'Table 3.3' to explain the components of the cost function (TFC, TVC, and TC) and how they behave at different output levels, specifically at zero output.