Long Run

AAA

DEFINITION of '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. Additionally, whereas firms may be a monopoly in the short-term they may expect competition in the long-term.


In economics, long-run models may shift away from short-turn equilibriums, in which supply and demand react to price levels with more flexibility.

INVESTOPEDIA EXPLAINS 'Long Run'

Firms examining the long run understand that they cannot alter levels of production in order to reach an equilibrium between supply and demand. In the long run, they can either expand or reduce production capacity or enter or exit an industry based on expected profits. In the short run, barriers to entry prevent competitors from quickly entering a market. In the long run, however, competitors may enter or exit an industry depending on the levels of profit previously seen by companies operating in that industry.

RELATED TERMS
  1. Marginal Cost Of Production

    The change in total cost that comes from making or producing ...
  2. Long-Run Average Total Cost - LRATC

    A business metric that represents the average cost per unit of ...
  3. Long Term

    Holding an asset for an extended period of time. Depending on ...
  4. Short Run

    In economics, it is the concept that within a certain period ...
  5. Credibility Theory

    Tools, policies, and procedures used by actuaries when examining ...
  6. Premium to Surplus Ratio

    Net premiums written divided by policyholders’ surplus. The premium ...
Related Articles
  1. Investing Basics

    How To Make A Winning Long-Term Stock Pick

    Discover the key elements of a good long-term investment and how to find them.
  2. Investing Basics

    Finding Solid Buy-And-Hold Stocks

    Find out how to look at the big picture - even when the market's short-term outlook is less than rosy.
  3. Investing Basics

    Long-Term Investing: Hot Or Not?

    Forget the latest craze - you're more likely to succeed with a buy-and-hold strategy.
  4. Forex Education

    Forex: Finding Your Trading Style

    Determine your own trading style, and the versatile currency market will accommodate it.
  5. Taxes

    Capital Gains Tax 101

    Find out how taxes are applied to your investment returns and how you can reduce your tax burden.
  6. Economics

    What is a roll-up merger and why does it occur?

    Find out what a roll-up merger is and how it is executed. See why roll-ups might bring added efficiency and competition into a fragmented market.
  7. Economics

    What are the differences between internal and external economies of scale?

    Take a deeper look at the differences between internal and external economies of scale, and learn why internal economies offer more competitive advantage.
  8. Economics

    How does marginal cost of production relate to economies of scale?

    See how marginal cost of production relates to economies of scale, and why every company should be concerned with reducing its marginal costs.
  9. Professionals

    How are labor demand forecasts made in human resources planning?

    Discover how human resource planning might be used to estimate the correct demand for labor in a given market, both qualitatively and quantitatively.
  10. Professionals

    How do companies measure labor supply in human resources planning?

    Find out how and why a company's human resources department would measure labor supply, and what policies would address a shortage or surplus.

You May Also Like

Hot Definitions
  1. Multiplier Effect

    The expansion of a country's money supply that results from banks being able to lend. The size of the multiplier effect depends ...
  2. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  3. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  4. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  5. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  6. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
Trading Center