Answer:
Costs and production are both very important for the economy.
Explanation:
Costs are the values of the goods and services used for the production of other goods and services. For example, for the production of a chair, we must factor the cost of the raw material: wood, and the cost of direct labor: the wage of the carpenter.
Costs therefore, are crucial in determining the amount of output in an economy.
Cost also determine help determine the market structure of the economy. In general terms, when costs are high, profits are lower, which attracts less firms to the sector, and results in less competitive market structures such as oligopoly or monopoly.
The opposite is true when costs are low, because in this situation profits are likely to be higher, which attracts more firms to the sector, resulting in more competitive market structures like perfect competition or monopolistic competition.
Finally, we can say that the production of goods and services is important because it is the most important factor in determining the living standars of people in an economy. When many goods and services are produced, people obtain higher incomes because they are paid for the production of these goods and services.
