A firm average cost decreases in the longrun because?
-
increasing returns to scale
- diminishing average returns
- decreasing marginal returns
- decreasing average fixed cost
The correct answer is: A
Explanation
In the long run, all the factors of production are variable and the cost is accumulated as a result of changes in the various levels of production. Average cost decreases in the longrun due to increasing economies of scale. This refers to the situation where, as the quantity of output goes up, the cost per unit reduces.