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Long-run
 
 
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In economic
Economics

File:Ballard Farmers' Market - vegetables.jpgEconomics is the Social sciences that studies the Production theory basics, Distribution , and Consumption of Good and Service ....
 models, the long-run time frame assumes no fixed factors of production
Factors of production

In economics, factors of production are the resources employed to produce Good and services. Here the rate of output is modeled as a production function of the rate of use of each input employed.They are generally land, labor, and capital; the three groups of resources that are used to make all goods and services....
. Firm
Business

A business is a legally recognized organization designed to provide good s and/or Service to consumers. Businesses are predominant in capitalism economies, most being privately owned and formed to earn profit that will increase the wealth of its owners....
s can enter or leave the marketplace
Marketplace

A marketplace is the space, actual or metaphorical, in which a market operates. The term is also used in a trademark law context to denote the actual consumer environment, ie....
, and the cost (and availability) of land
Land (economics)

In economics, land comprises all natural resource whose supply is inherently fixed such as any and all particular geographical locations, mineral deposits, and even geostationary orbit locations and portions of the electromagnetic spectrum....
, labor, raw materials, and capital goods can be assumed to vary. In contrast, in the short-run
Short-run

In economics, the concept of the short-run refers to the decision-making time frame of a firm in which at least one factor of production is fixed....
 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:

Long run marginal cost (LRMC) refers to the cost of providing an additional unit of service or commodity
Commodity

A commodity is anything for which there is demand, but which is supplied without qualitative product differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk....
 under assumption that this requires investment in capacity expansion.






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In economic
Economics

File:Ballard Farmers' Market - vegetables.jpgEconomics is the Social sciences that studies the Production theory basics, Distribution , and Consumption of Good and Service ....
 models, the long-run time frame assumes no fixed factors of production
Factors of production

In economics, factors of production are the resources employed to produce Good and services. Here the rate of output is modeled as a production function of the rate of use of each input employed.They are generally land, labor, and capital; the three groups of resources that are used to make all goods and services....
. Firm
Business

A business is a legally recognized organization designed to provide good s and/or Service to consumers. Businesses are predominant in capitalism economies, most being privately owned and formed to earn profit that will increase the wealth of its owners....
s can enter or leave the marketplace
Marketplace

A marketplace is the space, actual or metaphorical, in which a market operates. The term is also used in a trademark law context to denote the actual consumer environment, ie....
, and the cost (and availability) of land
Land (economics)

In economics, land comprises all natural resource whose supply is inherently fixed such as any and all particular geographical locations, mineral deposits, and even geostationary orbit locations and portions of the electromagnetic spectrum....
, labor, raw materials, and capital goods can be assumed to vary. In contrast, in the short-run
Short-run

In economics, the concept of the short-run refers to the decision-making time frame of a firm in which at least one factor of production is fixed....
 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
Commodity

A commodity is anything for which there is demand, but which is supplied without qualitative product differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk....
 under assumption that this requires investment in capacity expansion. LRMC pricing is appropriate for best resource allocation
Resource allocation

Resource allocation is used to assign the available resources in an economic way. It is part of resource management....
, but may lead to a mismatch between operating costs and revenues.

In macroeconomic
Macroeconomics

Macroeconomics is a branch of economics that deals with the performance, structure, and behavior of a national or regional economy as a whole....
 models, the long run assumes full factor mobility between economic sectors, and often assumes full capital
Capital (economics)

In economics, capital or capital goods or real capital refers to factors of production used to create goods or services that are not themselves significantly consumed in the production process....
 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."

See also

  • Long run average cost
  • Short-run
    Short-run

    In economics, the concept of the short-run refers to the decision-making time frame of a firm in which at least one factor of production is fixed....