Long-Run Average Cost Is Never Greater Than Short-Run Average Cost

question 38

Multiple Choice

Long-run average cost is never greater than short-run average cost because in the long run,

• A) capital costs equal zero.
• B) the firm can move to the lowest possible isocost curve.
• C) wages always increase over time.
• D) wages always decrease over time.

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Definitions:

Depreciation Calculation

The process of allocating the cost of a tangible asset over its useful life.

Placed In Service

The point in time when an asset is ready and available for its intended use, often marking the start of depreciation or amortization for accounting purposes.

Depreciable Cost

The total cost of an asset that is subject to depreciation, including purchase price and any additional expenses to bring the asset to its intended use, minus salvage value.

Straight-Line Depreciation

An approach to apportion the value of a tangible asset across its productive years in uniform yearly sums.