A firm average cost decreases in the longrun because?
ECONOMICS
WAEC 2018
A firm average cost decreases in the longrun because?
- A. increasing returns to scale
- B. diminishing average returns
- C. decreasing marginal returns
- D. decreasing average fixed cost
Correct Answer: A. increasing returns to scale
Explanation
In the long run, all the factors of production are variable and the cost is accumulated as a result of changes in the various levels of production. Average cost decreases in the longrun due to increasing economies of scale. This refers to the situation where, as the quantity of output goes up, the cost per unit reduces.
Post an Explanation Or Report an Error
If you see any wrong question or answer, please leave a comment below and we'll take a look. If you doubt why the selected answer is correct or need additional more details? Please drop a comment or Contact us directly. Your email address will not be published. Required fields are marked *