Final answer:
A firm chooses its fixed costs in the long run based on the level of output it expects to produce in order to optimize production and minimize costs by adjusting investments and resources.
Step-by-step explanation:
In the long run, a firm chooses its fixed costs based on the level of output it expects to produce. The firm has the flexibility to adjust its fixed costs, such as investing in new equipment or expanding its production facilities, in order to optimize its production and minimize costs.
For example, if a firm plans to produce a high output level, it may choose to invest in more efficient machinery and hire additional workers to increase production capacity. This would require higher fixed costs but could result in lower average costs per unit produced.
In contrast, if a firm plans to produce a lower output level, it may choose to reduce its fixed costs by downsizing its operations or using existing resources more efficiently. This would result in lower fixed costs but may lead to higher average costs per unit produced due to the lower economies of scale.