Final answer:
In the long run, all inputs are variable and a firm can choose the optimal combination of resources and inputs to produce its desired level of output without facing diminishing returns.
Step-by-step explanation:
In the long run, all inputs are variable. This means that a firm can adjust the amount of all resources and inputs it uses to produce its desired level of output. In contrast, in the short run, there are some inputs that are fixed and cannot be easily changed. As a result, there can be diminishing returns in the short run because increasing the variable inputs without changing the fixed inputs may lead to less additional output.
For example, imagine a pizza restaurant that has a fixed number of ovens. In the short run, if the restaurant hires more chefs (a variable input), there may come a point where the additional chefs and the limited number of ovens mean that each chef has less oven space and is less efficient, resulting in diminishing returns. But in the long run, the restaurant can add more ovens (a variable input) to accommodate the increased number of chefs and avoid diminishing returns.
Therefore, in the long run, since all inputs are variable, a firm can choose the optimal combination of resources and inputs to produce its desired level of output without facing diminishing returns.