Final answer:
c. some fixed and some variable
In the long run, all costs are considered variable because firms can adjust all production factors over time.
While in the short run there are both fixed and variable costs, in the long run fixed costs such as rent and equipment become variable as firms can change their levels of these inputs.
Step-by-step explanation:
In the long run, costs may be considered as all variable. This distinction is significant in understanding how firms analyze costs and make production decisions.
Unlike the short run, where some costs are fixed, in the long run, all costs are variable because firms can alter all factors of production. They can move to a different location, increase or decrease the size of their operations, invest in new technologies, or enter or exit a market.
In the short-run perspective, costs are divided into fixed costs, like rent on a factory, and variable costs, which are incurred during the act of producing goods or services.
Fixed costs do not vary with the level of output, while variable costs typically show diminishing marginal returns, leading to an increase in marginal cost as output rises.
However, in the long run, fixed inputs can change, and consequently, fixed costs become variable. Costs such as rent, equipment, and research and development become adjustable over time, aligning with the company's scale of production.