Long Run
Definition
In economics, the long run refers to a period of time where all inputs can be varied and adjusted. It allows firms to make changes in their production processes and adjust their scale of operations.
Analogy
Imagine planning a road trip with your friends. The long run is like having enough time to plan everything from scratch - deciding on destinations, routes, accommodations, and even changing vehicles if needed. You have flexibility and can make adjustments based on your preferences and circumstances.
Related terms
Short Run: The short run is a period where at least one input is fixed and cannot be changed. Firms have limited flexibility during this time frame.
Economies of Scale: Economies of scale occur when increasing production leads to lower average costs per unit due to factors like specialization and increased efficiency.
Diseconomies of Scale: Diseconomies of scale happen when increasing production leads to higher average costs per unit due to factors like coordination challenges or diminishing returns.
"Long Run" appears in:
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Practice Questions (7)
In the long run, firms can change both their plant capacity and output level. This flexibility allows firms to?
In the long run, if a firm is earning a loss, what is the likely outcome for that industry?
In the long run, what happens to profits in a perfectly competitive market?
Which of the following is true about profit in the long run of perfect competition?
What does it mean when firms in imperfectly competitive markets are "inefficient" in the long run?
In monopolistic competition, firms can enter or exit the market in the long run due to:
In the long run, firms in monopolistic competition tend to:
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