In the short run average costs eventually ________ because of diminishing returns, and in the long run average costs eventually ________ because of diseconomies of scale.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Question

Quizplus · Accepted Answer

In the short run, average costs increase due to diminishing returns as more variable inputs are added to fixed inputs, leading to less efficient production. In the long run, average costs also increase due to diseconomies of scale, where the cost per unit increases as the scale of production increases beyond a certain point, often due to management inefficiencies, increased complexity, and coordination challenges.

In the Short Run Average Costs Eventually ________ Because of Diminishing