In the long run which of the following is true Profit effect

In the long run, which of the following is true? ?Profit effects offset cost effects. O Profit effects are larger than cost effects. O Cost effects are larger than profit effects None of the choices are correct

Solution

Correct option : B) profit effects are higher than cost effect.

Explanation : In long run, all factors of production and costs are variable. And firm can increase or decrease the scale of production in response to profits or we can say that in the long?run the firm will be operating at the minimum point of its long?run average total cost curve. Hence profit effect is more than the cost effect.