In the long run, average cost must be rising as the firm increases output as long as the........... operates.

Decreasing Returns to Scale.

The correct answer is Option (3) → Decreasing Returns to Scale.

In the long run, all inputs are variable, and the firm's cost behavior is explained through returns to scale. When a firm experiences decreasing returns to scale, increasing all inputs leads to a less than proportionate increase in output. As a result, the average cost increases with output.Therefore, as long as Decreasing Returns to Scale operate, the average cost must rise in the long run.