Question

Which of the following statements is not correct?

1) in the long run, there are no fixed costs.
2) marginal cost is independent of fixed costs.
3) economies of scale is a short-run concept
4) diminishing marginal product explains increasing marginal cost.

Answer 1

Economies of scale is a long-run concept and not a short-run one (option 3), which is the incorrect statement among the options given. It is associated with the long-run average cost curve where all inputs are variable. Diminishing marginal product relates to increasing marginal cost as additional units of inputs yield less additional output.

Step-by-step explanation:

The statement among the options given that is not correct is: "economies of scale is a short-run concept." This statement is incorrect because economies of scale refer to the long-run average cost curve, where all inputs can be adjusted.


The correct concepts are as follows:

1. In the long run, there are no fixed costs, because all costs become variable as firms can adjust all inputs to the level of output.
   
   
2. Marginal cost is indeed independent of fixed costs; it is the cost of producing one additional unit of a good and is influenced by variable costs rather than fixed costs.
   
   
3. The concept of diminishing marginal product is related to increasing marginal cost because, as additional units of a variable input (like labor) are added to fixed inputs (like capital), the additional output from each new unit of input eventually decreases, leading to an increase in marginal cost.