If a firm increases its output level in the short run, thenSelected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.avariable costs rise, but fixed costs remain unchangedbboth variable costs and fixed costs risecvariable costs rise, but fixed costs falldvariable costs remain unchanged, but fixed costs rise
Question
If a firm increases its output level in the short run, thenSelected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.avariable costs rise, but fixed costs remain unchangedbboth variable costs and fixed costs risecvariable costs rise, but fixed costs falldvariable costs remain unchanged, but fixed costs rise
Solution
The correct answer is a) variable costs rise, but fixed costs remain unchanged.
Here's why:
In the short run, a firm has both fixed costs and variable costs. Fixed costs are costs that do not change with the level of output. These include costs such as rent, salaries, and equipment. Variable costs, on the other hand, are costs that change with the level of output. These include costs such as raw materials, direct labor, and utilities.
If a firm increases its output level in the short run, it will need to use more raw materials, possibly hire more workers, and may use more utilities, all of which are variable costs. Therefore, variable costs will rise.
However, fixed costs such as rent and salaries will not change because they do not depend on the level of output. Therefore, fixed costs remain unchanged.
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