that do not vary as output increases. Examples include rent, office costs and, certainly in the short run, machinery. Variable costs, surprise surprise, are costs that do vary as output increases. The best example is raw materials. If a firm wants to make more chocolate, for example, it will need more cocoa beans and sugar. Labour is also a variable cost, but some textbooks refer to it as semi-variable. Many firms have a fairly permanent staff. If they need to increase output, the workers will be…
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