Which of the following statements is true? In the long run, the average cost cur
ID: 1225564 • Letter: W
Question
Which of the following statements is true?
In the long run, the average cost curve is always downward sloping.
In the long run, the quantities of all inputs are fixed.
In the long run, the firm's fixed costs are greater than its variable costs.
In the long run, the total variable cost equals the total fixed cost.
In the long run, all costs are variable costs.
A)In the long run, the average cost curve is always downward sloping.
B)In the long run, the quantities of all inputs are fixed.
C)In the long run, the firm's fixed costs are greater than its variable costs.
D)In the long run, the total variable cost equals the total fixed cost.
E)In the long run, all costs are variable costs.
Explanation / Answer
ANSWER.) E.) In the long run, all costs are variable costs.
The "variableness" of the costs refers to the quantity (of factor inputs) purchased, not the price charged. For these types of cost models, long run and short run are *defined* by how many of its inputs the firm can change and since In the long run, a firm can change all inputs (size of firm, labor, capital) it can also choose to exit the economy.
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