Answer to Question #48530 in Microeconomics for Yoyo

Question

Suppose the price of a firm’s fixed input rises. If it decides to maintain its production level, its average costs are lower in the long-run than they are in the short-run. Explain why the statement is True, False, or Uncertain according to economic principles.

Answer 1

Statement Is Uncertain or True. In long period of time firm would definitely have higher average costs. At the same time in long term period it could try to optimize its costs and reduce fixed costs and it won’t lead to increase in average costs.