How do variable costs behave as output increases?

Variable costs are expenses that change in direct proportion to the output volume produced. As output increases, the total variable costs also increase as more materials, labor, and other resources are consumed in the production process. This increase tends to be steady, aligning with the scale of production; therefore, they can be viewed as increasing steadily with higher output levels.

For example, in manufacturing scenarios, if a factory produces more units of a product, the cost for raw materials, labor hours dedicated to production, and utilities directly tied to production will rise accordingly. This relationship creates a direct correlation between the output and variable costs, illustrating how they expand in alignment with increased production.

In contrast, the other options do not accurately represent the behavior of variable costs in relation to output. While option one suggests a significant decrease, this does not align with how variable costs operate. The second choice implies that variable costs remain constant, which contradicts their inherent nature of varying with output. Lastly, the idea that variable costs fluctuate randomly is inaccurate as their changes are predictable and systematic, tied closely to the level of production activity.