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

Question

Quizplus · Accepted Answer

In the short run, average costs increase due to diminishing returns, which occur because at least one factor of production is fixed, leading to less efficient production as more units are produced. In the long run, all factors of production are variable, and average costs can increase due to diseconomies of scale, where per unit costs increase as the scale of production increases beyond a certain point.

In the Short Run Average Costs Eventually Increase Because of ________