Which statement best describes long-run cost behavior?

Which statement best describes long-run cost behavior?

• A. All costs are fixed
• B. All costs are variable
• C. Some costs are fixed
• D. Costs become zero

Answer: (B)

In the long run, all inputs can be adjusted, so there are no fixed inputs or fixed costs. Every cost component varies with the level of output, meaning costs are entirely variable in the long run. That’s why the best statement is that all costs are variable. Fixed costs exist only when some inputs are fixed in the short run, and costs don’t drop to zero in any normal scenario.

In the long run, all inputs can be adjusted, so there are no fixed inputs or fixed costs. Every cost component varies with the level of output, meaning costs are entirely variable in the long run.

That’s why the best statement is that all costs are variable. Fixed costs exist only when some inputs are fixed in the short run, and costs don’t drop to zero in any normal scenario.