Consider the short- run and long- run cost curves for a firm.If factor prices decrease,
A)there will be no change in the cost curves in the long run.
B)the firm will move down along both its long- run and short- run average cost curves.
C)both the long- run and short- run average cost curves will shift downward.
D)the firm will move down along its long- run average cost curve only.
E)there will be a downward shift in the long- run average cost curve but not in the short- run average cost curve.

Question

Quizplus · Accepted Answer

A decrease in factor prices would lead to a decrease in the firm's costs of production, which would result in lower average cost curves both in the short run and the long run. Therefore, both the short-run and long-run average cost curves will shift downward. Hence, option C is the correct choice.

Consider the Short- Run and Long- Run Cost Curves for a Firm.If