The conventional approach to planning production is to start with the goods and services that a firm intends to provide and then decide what production configuration will achieve the intended output a...The conventional approach to planning production is to start with the goods and services that a firm intends to provide and then decide what production configuration will achieve the intended output at the lowest cost. Due to scale effects, this marginal cost may vary with the output level, so firms may face a circular problem of needing to know the marginal cost to decide on the outputs, but the marginal cost may change depending on the output level selected.
