Which of the following statements is false?
A)Average fixed cost continually declines as output increases.
B)Marginal cost is equal to the change in total cost divided by the change in quantity of output.
C)The law of diminishing marginal returns states that, in the long run, as ever larger amounts of a variable input are combined with fixed inputs, eventually the marginal physical product of the variable input will decline.
D)The vertical distance between the AVC curve and the ATC curve declines as more output is produced.

Question

Quizplus · Accepted Answer

The law of diminishing marginal returns applies to the short run, not the long run, because it describes a scenario where at least one input (e.g., capital) is fixed, and as more of the variable input (e.g., labor) is added, the additional output from each extra unit of input eventually decreases. In the long run, all inputs are considered variable, and the concept of diminishing marginal returns as described does not apply.

Which of the Following Statements Is False