Question on: WAEC Economics - 2018
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
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Correct Option: C
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.
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