Answer to Question #206892 in Economics for Lubi

Question

For PPF with variable costs, when does specialisation stops?

Answer 1

Variable costs depend on the volume of production significantly. Their size changes in proportion to the volume of production - goods, works, services. A typical example is the consumption of raw materials and materials. To produce more units of products, more of this resource is required, which means that costs will vary.

Variable costs also include the wages of production personnel, the cost of electrical and other types of energy for heating, lighting of industrial premises, the consumption of semi-finished products in production, etc.

Variable costs are included in the unit cost as a constant estimate. An increase or decrease in costs is achieved by changing the physical volume of production.