As long as a firm’s total revenue is greater or equal to its variable cost, the firm will continue to operate in the short-run. An expense for the company that varies according on how much is the produced or sold is called a variable cost. The depending on a company's production or sales volume, variable costs grow or fall.
They climb as production rises and reduce as production declines. A manufacturing company's raw material and packaging costs, or a retail business' credit card transaction fees or shipping costs, which increase or decrease with sales, are examples of the variable costs.
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