If a firm increases production, its:
A)variable costs rise.
B)fixed costs stay the same.
C)total costs increase.
D)All of these are correct.

Question

Quizplus · Accepted Answer

When a firm increases production, its variable costs rise because these costs are directly associated with the level of output (e.g., materials, labor). Fixed costs remain unchanged regardless of the level of production, as they are incurred even if the production is zero (e.g., rent, salaries of permanent staff). Consequently, the total costs, which are the sum of fixed and variable costs, also increase.

If a Firm Increases Production, Its