In the short run average costs eventually increase because of ________, and in the long run average costs eventually increase because of ________.

A) diminishing returns; diseconomies of scale
B) diseconomies of scale; diminishing returns
C) constant returns to scale; decreasing returns to scale
D) increasing returns to scale; diseconomies of scale

Diminishing Returns

A principle stating that as one input variable is increased, there will be a point at which the additions of output will begin to decrease, holding all other inputs constant.

Diseconomies of Scale

The phenomenon where production costs per unit increase as a firm operates at higher levels of output.

Long Run

A period in economic theory during which all factors of production and costs are variable.