Final answer:
A firm looking to cut costs through more efficient production is attempting to reduce its variable costs. Doing so would help in decreasing marginal costs and improving efficiency, as fixed costs are sunk and cannot be adjusted.
Step-by-step explanation:
If a firm wants to cut its costs through more efficient production, we should assume that the firm is trying to Reduce its variable costs (Option B). This is because fixed costs are sunk costs and, in economic decision-making, should be ignored since they cannot be altered for future production. Variable costs are the costs that change with the level of production and typically have diminishing marginal returns, meaning they rise as production increases. Therefore, reducing variable costs would help in decreasing the marginal costs of production and making the firm more efficient. Furthermore, variable costs are under the control of the firm and can be altered by improving efficiency and productivity.
Calculating the average variable cost can also help a firm determine its profitability. If the average variable cost is lower than the market price, the firm could potentially make a profit, excluding fixed costs. By focusing on reducing variable costs, the firm can improve its potential for profitability and efficiency within the short-run production timeframe.