Manager A of firm XYZ said to the manager B of the same firm :In long run there are no fixed costs.
To this manager B replied :So, does that mean our total cost and the total variable cost will coincide in the long run?
What you think Manager A should reply?
Answer & explanation
Correct answer: option 1
The correct answer is Option 1: Yes
Here's why:
- Long Run and Fixed Costs: In the long run, all factors of production are variable. This means that there are no fixed costs.
- Total Cost (TC): TC = Total Fixed Cost (TFC) + Total Variable Cost (TVC).
- In the Long Run: Since TFC = 0 in the long run, TC = TVC.
Therefore, in the long run, the total cost and total variable cost will coincide.