Long-run average cost is defined as:
A)the minimum average cost of producing any level of output when all inputs are variable.
B)the minimum average cost of producing any level of output when the amount of capital is varied and all other inputs are held constant.
C)the average of the short-run costs associated with each amount of capital employed by the firm.
D)the minimum average cost of producing any level of output when all inputs are fixed.

Question

Quizplus · Accepted Answer

Long-run average cost refers to the lowest possible cost of producing a specified level of output when all inputs are variable. In the long run, a firm is able to vary all of its inputs, which means it can choose the most efficient combination of inputs to minimize its costs. Therefore, option A is the correct definition of long-run average cost. Option B only considers capital as a variable input, while option C refers to short-run costs. Option D refers to the situation where all inputs are fixed, which is not applicable in the long run.

Long-Run Average Cost Is Defined As