a firm average cost decreases in the longrun because?
A. increasing returns to scale B. diminishing average returns C. decreasing marginal returns D. decreasing average fixed cost
Correct Answer: C
Explanation
In the long run, when all inputs under the control of the firm are variable, there is no fixed cost and thus no average fixed cost. Instead long-run average cost is affected by increasing and decreasing returns to scale, which translates into economies of scale and diseconomies of scale.
