Practicing Success
As long as IRS operates, long run average cost _______ as the firm increases output and the long run average cost remains _______ as long as CRS operates. |
Remains constant, falls Falls, remains constant Remains Constant, remains constant Falls, falls |
Falls, remains constant |
As long as IRS operates, long run average cost falls as the firm increases output and the long run average cost remains constant as long as CRS operates. In IRS, to increase output by a certain proportion, inputs need to be increased by less than that proportion. With the input prices given, cost also increases by a lesser proportion. Similar logic applies to CRS. |