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

Question

Quizplus · Accepted Answer

When factor prices decrease, both the long-run and short-run average cost curves will shift downward because the cost of production decreases, leading to lower average costs at all levels of output.

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