If There Are No Fixed Costs in the Long Run,how

question 36

Multiple Choice

If there are no fixed costs in the long run,how can it be said that economies of scale arise from spreading fixed costs over more units of output?

• A)Economies of scale is a short run phenomenon,and so diminishing returns is the root cause of scale economies.
• B)Costs of quasi-fixed inputs get spread over more units of output whichdrives down average cost in the long run.
• C)Average fixed costs decline continuously as output rises.
• D)Long-run average cost falls because all fixed costs are sunk.

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Definitions:

Total Variable Cost

The sum of all costs that vary with output level, including costs of direct materials, direct labor, and other expenses that increase or decrease as production volume changes.

Variable Cost

Costs that change in proportion to the level of output in the production process.

Marginal Product

The marginal product is the additional output produced as a result of using one more unit of a particular input, holding all other inputs constant.

Average Variable Cost

The total variable costs divided by the quantity of output produced, indicating the variable cost per unit of output.