In the short run average costs eventually ________ because of diminishing returns, and in the long run average costs eventually ________ because of diseconomies of scale.

A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Diminishing Returns

A principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot continue to increase and may even decrease.

Diseconomies of Scale

A phenomenon where production costs per unit increase as a firm's output increases, often due to inefficiencies that arise when companies become too large.