Which of the following statements best describes costs in the long run?
A) The average fixed cost curve is U-shaped.
B) The average fixed cost exceeds the average variable cost of production.
C) All costs are variable.
D) All costs are fixed.

Question

Quizplus · Accepted Answer

In the long run, all costs are variable as firms have more flexibility to adjust their inputs and expenses. Both fixed and variable costs can be adjusted in the long run depending on the firm's output level. Therefore, option C correctly describes the nature of costs in the long run. Option A is incorrect as the U-shape applies only to the average variable cost curve, not the average fixed cost curve. Option B is incorrect as average fixed costs and average variable costs may be equal or the latter may exceed the former. Option D is incorrect as there are no fixed costs in the long run.

Which of the Following Statements Best Describes Costs in the Long