What happens to costs as output increases?

As output increases, costs can behave in different ways depending on the scale of production. Initially, costs may decrease due to economies of scale, where fixed costs are spread over more units and operational efficiencies are gained. However, after a certain point, costs may begin to rise due to diminishing returns, where adding more inputs results in less proportional increases in output. Ultimately, the relationship between output and costs can vary based on factors such as production capacity, resource availability, and operational efficiency.