Question

Firms use cost data to make decisions about how many units to produce based on their – costs. Increasing production may not always lead to an increase in profit. Increasing production will cause a firm’s – costs to increase, which could outweigh any benefits that were previously gained by lowering their overhead—which is determined by their – costs in the short run.

Answer 1

Firms use cost data to make decisions about how many units to produce based on their fixed and variable costs.

How to illustrate the information?

Increasing production may not always lead to an increase in profit.

Increasing production will cause a firm’s variable costs to increase, which could outweigh any benefits that were previously gained by lowering their overhead which is determined by their average fixed costs in the short run.

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