Long-run

Definition

The long-run refers to a period of time during which all factors of production can be adjusted. Firms have more flexibility in this timeframe and can make changes such as expanding their factory size or hiring more workers.

Related terms

Short-run: A period of time during which at least one factor of production (usually capital) cannot be changed. Some inputs can be adjusted, but others remain fixed.

Economies of Scale: When a firm experiences cost advantages due to an increase in its scale of production. This often occurs when producing larger quantities reduces average costs.

Diseconomies of Scale: When a firm experiences cost disadvantages due to an increase in its scale of production. This happens when producing larger quantities leads to higher average costs.