Long-run


Long-run

In economic models, the long-run time frame assumes no fixed factors of production. Firms can enter or leave the marketplace, and the cost (and availability) of land, labor, raw materials, and capital goods can be assumed to vary. In contrast, in the "short-run" time frame, certain factors are assumed to be fixed, because there is not sufficient time for them to change. This is related to the long run average cost (LRAC) curve, an important factor in microeconomic models.

A generic firm can make these changes in the long-run:
*Enter an industry
*Increase its plant
*Decrease its plant
*Leave an industry

"Long run marginal cost" ("LRMC") refers to the cost of providing an additional unit of service or commodity under assumption that this requires investment in capacity expansion. LRMC pricing is appropriate for best resource allocation, but may lead to a mismatch between operating costs and revenues.

In macroeconomic models, the long run assumes full factor mobility between economic sectors, and often assumes full capital mobility between nations.

The concept of "long run cost" is used in cost-volume-profit analysis and product mix analysis.

A famous use of the phrase was by John Maynard Keynes, who said in dry humor, "In the long run, we are all dead."

ee also

* Long run average cost
* Short-run


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  • long-run — UK US adjective [before noun] ► continuing to exist or have an effect for a long period of time: long run growth/inflation/potential »Spending on public services helps long run economic growth. »Consumer confidence is well above its long run… …   Financial and business terms

  • long run — (n.) also long run, ultimate outcome, 1620s, from LONG (Cf. long) (adj.) + RUN (Cf. run) (n.), on notion of when events have run their course. As an adjective from 1804 …   Etymology dictionary

  • long-run — adj. 1. relating to or extending over a relatively long time; as, the long run significance of the elections. Syn: long term. [WordNet 1.5] …   The Collaborative International Dictionary of English

  • long-run — [lôŋ′run′] adj. extending over a long time …   English World dictionary

  • long run — A period of time in which all costs are variable; longer than one year. Bloomberg Financial Dictionary * * * long run UK US noun [S] (also long term) ► a long period of time: »We are optimistic about the long term. a long run of sth »There are… …   Financial and business terms

  • Long Run — A period of time in which all factors of production and costs are variable. In the long run, firms are able to adjust all costs, whereas in the short run firms are only able to influence prices through adjustments made to production levels.… …   Investment dictionary

  • long-run — /lawng run , long /, adj. happening or presented over a long period of time or having a long course of performances: a long run hit play. [1900 05] * * * …   Universalium

  • long run — n. long range outlook in, over the long run * * * [ lɒŋrʌn] over the long run [ long range outlook ] in …   Combinatory dictionary

  • long run — noun a period of time sufficient for factors to work themselves out in the long run we will win in the long run we will all be dead he performed well over the long haul • Syn: ↑long haul • Hypernyms: ↑time period, ↑perio …   Useful english dictionary

  • long run — noun Date: 1627 a relatively long period of time usually used in the phrase in the long run • long run adjective …   New Collegiate Dictionary


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