In the Short Run Average Costs Eventually Increase Because of ________

question 197

Multiple Choice

In the short run average costs eventually increase because of ________, and in the long run average costs eventually increase because of ________.

• A) diminishing returns; diseconomies of scale
• B) diseconomies of scale; diminishing returns
• C) constant returns to scale; decreasing returns to scale
• D) increasing returns to scale; diseconomies of scale

---

Definitions:

Average Variable Cost

The cost of each unit variable, determined by dividing the overall variable costs by the produced output quantity.

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm's production increases.

Diminishing Returns

A principle stating that as more of a variable input is added to a fixed input, beyond some point, the additional output from the additional input will decrease.

Marginal Cost

The financial outlay required to create another unit of a good or service.