Meanwhile, Out in the Marketplace
Regardless of how a business structures its costs, it must make a trade-off between fixed and variable inputs. Also, every business must decide how large or small it wants to be. Of course, market realities and management skills have as much to do with the growth of a business as its underlying economics. However, managers and investors ignore the microeconomic fundamentals of their business at their peril.
The Least You Need to Know
• The costs of every business can be broken down into variable costs and fixed costs. Variable costs are expenses that change with the volume of production. Fixed costs do not change with the level of production.
• Total costs are minimized at the point where the marginal product ...