What would happen to unit costs if extra demand led to higher output?

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1119796

2026-05-01 04:20

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If extra demand leads to higher output, unit costs may initially decrease due to economies of scale, where fixed costs are spread over a larger number of units produced. However, if production capacity is strained or resources become more limited, variable costs may rise, leading to higher unit costs. Ultimately, the net effect on unit costs will depend on the extent of increased demand and the efficiency of production processes.

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