A firm operating at full capacity will experience rising short-run total costs when
Answer Details
When a firm is operating at full capacity, it is producing the maximum output possible with its current level of resources. If demand for the firm's product increases beyond this level of production, the firm will need to increase its inputs, such as labor and raw materials, to produce more output. This means the firm will experience rising short-run total costs, as it has to pay more for additional inputs, and the law of diminishing marginal returns will set in, meaning that the additional units of output will become more expensive to produce. Therefore, the correct answer is: prices of its variable inputs rise.