Assertion: The total cost and the total variable cost coincide in the long run.
Reasoning: There are no fixed costs in the long run.
Answer & explanation
Correct answer: option 1
The correct answer is Option 1: Both Assertion (A) and reasoning (R) are correct and R is the correct explanation of A.
✔ Assertion (A) is correct:
- Total Cost (TC) = Total Fixed Cost (TFC) + Total Variable Cost (TVC).
- In the long run, all costs become variable, meaning TFC = 0.
- Thus, TC and TVC are the same in the long run, as there are no fixed costs to add.
✔ Reasoning (R) is also correct and explains the assertion:
- In the long run, firms can adjust all inputs, so fixed costs do not exist.
- Since all costs are variable, only TVC remains, and TC = TVC.
- This correctly explains why TC and TVC coincide in the long run.
Therefore, the reasoning correctly explains the assertion.