In the short run, if a firm wishes to increase output it will need more raw materials to fabricate its product. It may need to hire more workers, use more electricity and water and so forth. If so, these are variable costs. If it decided to produce less output it could spend less on these items.

   The rent a firm pays on building or land, the forgone salary of the owner(s), property taxes and similar items don't typically increase or decrease daily as the firm increases or decreases its output. As a result, these items are usually fixed costs. A firm typically has to shut down permanantly to avoid these costs.

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