A major characteristics of a firm operating at a long-run equilibrium position is that

1. Analyze the question The question asks about a key feature of a firm operating in the long run. It tests whether you can tell the long run from the short run.

2. Explain the concept

• Short run: at least one factor of production (usually capital, such as machinery or factory size) is fixed. This means the firm has fixed costs and variable costs.
• Long run: the period is long enough for the firm to change all factors of production. It can build a bigger factory, buy new machines, or leave the industry. So no cost is fixed, and all costs are variable.

3. Evaluate each option

• A. All costs can be varied. Correct. This is the defining feature of the long run.
• B. Average variable cost is fixed. Wrong. AVC changes with output, and it is a short-run concept.
• C. Fixed cost cannot be changed. Wrong. This describes the short run. In the long run there are no fixed costs.
• D. Marginal cost is fixed. Wrong. Marginal cost normally rises as output increases. It is constant only in special cases.
• E. Only variable cost changes. Wrong. This is the short-run situation, where fixed costs stay the same.

4. Answer The correct option is A: all costs can be varied.

5. Exam tip Remember this: "Long run = Long enough to change everything." If an option says something is fixed, it is almost certainly describing the short run. In the long run, all factors and all costs are variable.