Estimation of the long run production function may help a manager in understanding and taking
decisions of long term nature such as capital expenditure. Estimation of cost curves will help production
manager in understanding the nature and shape of cost curves and taking useful decisions. Both short
run cost function and the long run cost function must be estimated, since both sets of information will be
required for some vital decisions. Knowledge of the short run cost functions allows the decision makers
to judge the optimality of present output levels and to solve decision problems of production manager.
Knowledge of long run cost functions is important when considering the expansion or contraction of
plant size, and for confirming that the present plant size is optimal for the output level that is being
produced.
This study has focus on a type of industries, which, according to the usual socio- scientific indicators, is
referred to as as non-research intensive and which mostly comprises “traditional” industries.