explain how a firm is able to deal with both types of costs.

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explain how a firm is able to deal with both types of costs.

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Answer 1

Answer #1

The firms incur their onetime expenditures on fixed costs which are fixed for a long time whereas the variable costs are those which vary with every unit of production.

Fixed costs are those capital investments which give returns for a long time and hence do not change with production levels.

Variable costs are those which differ in short as well as long time. Example: labour, raw materials, etc. These factors vary with production levels and hence are not fixed.

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explain how a firm is able to deal with both types of costs.

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explain how a firm is able to deal with both types of costs.

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