explain the concept of short run and long run as assocaited bu firm about in 250words
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Answer (1)
1st Mar, 2020
Hello aspirant
In economics the long run is a theoretical concept in which all markets are in equilibrium, and all prices and quantities have fully adjusted and are in equilibrium. The long run contrasts with the short run, in which there are some constraints and markets are not fully in equilibrium.
In a long run, firms change production levels in response to (expected) economic profits or losses, and the land (economics) , labour , capital goods and entrepreneurship vary to reach the minimum level of long-run average cost.
In the short run, a profit-maximizing firm will:
- increase production if marginal cost is less than marginal revenue
- decrease production if marginal cost is greater than marginal revenue
- continue producing if average variable cost is less than price per unit, even if average total cost is greater than price
Hope this helps
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