In the context of long run equilibrium, if a firm decides to keep its output at the initial level, what is it most likely to do?

• A. Increase output to achieve economies of scale
• B. Continue using the same input combination as in the short run
• C. Adjust all inputs to minimize costs at the chosen output level
• D. Reduce output to avoid losses

Answer: (C)

Verified step by step guidance

1. Understand that in the long run, all inputs are variable, meaning the firm can adjust all factors of production to minimize costs.
2. Recall that long run equilibrium occurs when firms produce at the minimum point of their long-run average cost curve, achieving productive efficiency.
3. Recognize that if a firm keeps output at the initial level, it will adjust its input combination to minimize costs rather than sticking to the short-run input mix.
4. Note that increasing output to achieve economies of scale or reducing output to avoid losses are decisions related to changing output levels, not maintaining the initial output.
5. Conclude that the firm will adjust all inputs to minimize costs at the chosen output level, which aligns with the concept of long-run cost minimization.