Question

In the long run _____________.

• A. all inputs except labour can be varied, and so total variable cost remains unchanged but fixed cost is equal to zero
• B. all inputs, such as labour, equipment and offices or factories can be varied, and so total variable and fixed costs are lower
• C. all inputs, such as labour, equipment and offices or factories can be varied, and so total variable cost is equal to total cost since fixed cost is equal to zero
• D. all inputs, such as labour, equipment and offices or factories can be varied, and so average fixed cost is lower

Answer 1

The correct option is C all inputs, such as labour, equipment and offices or factories can be varied, and so total variable cost is equal to total cost since fixed cost is equal to zero

In the long run as there are no fixed costs of production, as all factors can be varied and adjusted according to the minimum efficiency scale. Thus the value of fixed cost in the long run is 0 and LAC = LVC