In the context of calculating marginal costs, how does an increase in production levels affect the short-run average cost if the average cost is decreasing?

When a company produces more goods, the cost of making each additional unit can change. If the average cost is decreasing, it means that producing more units is making each unit cheaper to produce. This often happens because fixed costs, like rent or machinery, are spread over more units, lowering the average cost per unit. For example, if a factory can produce 100 toys for $1,000, the average cost is $10 per toy. But if it produces 200 toys for $1,500, the average cost drops to $7.