In the long run, what happens to all costs?

• A. All costs are fixed
• B. All costs are variable
• C. Some costs are fixed
• D. Costs become zero

Answer: (B)

In the long run, all inputs can be varied. That means nothing remains fixed when you change output—the firm can adjust capital, equipment, and other resources to match the desired scale of production. With every input adjustable, the costs respond to how much you produce, so every cost component is variable rather than fixed. In contrast, fixed costs are tied to keeping certain inputs constant in the short run (like existing plant or long-term leases), which isn’t the case when computing costs over the long run. So the statement that all costs are variable best captures this idea, since no input is locked in at a fixed level in the long run.