Which of the following statements best explains why long-run average cost is never greater than short-run average cost?
A) In the long run, tangency of the isocost and isoquant is attainable. This is not necessarily true in the short run.
B) In the long run, diseconomies of scale might not occur, but in the short run diminishing marginal returns do.
C) In the long run, the cost of capital declines because the firm is able to pay down some of its debts.
D) In the long run, the average cost curve need not be U-shaped, but in the short run it is.
A
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The decision to expand the size of your factory is a long-run decision
Indicate whether the statement is true or false
An economy's production possibilities curve depicts different combinations of goods that can be
a. consumed by households in the economy since households are the suppliers of resources b. consumed by firms in the economy since firms actually do the producing c. produced in the economy with the available technology and resources d. produced and consumed by firms since they are the sole source of production in the economy e. bought and sold by both firms and households on the resource market