Final answer:
A firm can control its marginal costs by managing its variable costs. Variable costs are influenced by the production level and can be adjusted in the short term, affecting the firm's supply curve and production decisions.
Step-by-step explanation:
A firm can directly and immediately control its marginal costs (MC) by controlling its variable costs. In economic terms, marginal cost is the increase in total cost that arises from an extra unit of production. Variable costs vary with the level of output, unlike fixed costs, which are incurred regardless of the quantity produced. Since variable costs are associated with the actual production process, a firm can adjust them more readily on a short-term basis to influence marginal costs.
For instance, when a firm analyzes its supply curve and market price, it determines the quantity to produce where price equals marginal cost (P=MC) and ensures this is above the minimum average variable cost. If the firm is producing at a level where MC exceeds marginal revenue (MR), it can reduce output to where MR=MC, potentially lowering variable costs and aligning to the optimal production level. Conversely, if the market price is below the shutdown point where MC crosses the average variable cost (AVC), the firm should shut down immediately to avoid losses, as it cannot cover even its variable costs.