marginal costs may decrease or increase with scale; most business initiatives incur one-time or periodic fixed costs that then determine the subsequent variable costs; rising prices - or costs falling with scale - will tend to encourage increased production. For some business segment, define what constitutes its products or markets. Then try to explain a useful way to think about its costs. It would be especially useful if you could relate them to challenges and opportunities of expansion. A hint: additional copies of existing software basically have zero cost of production if you focus narrowly on production, so that is of little interest in itself. This is a reasonably tough question! 2 paragraphs, I would think.