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. Long-Run Average Total Cost - LRATC

    A business metric that represents the average cost per unit of ...
  2. Marginal Cost Of Production

    The change in total cost that comes from making or producing ...
  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. Absolute Percentage Growth

    An increase in the value of an asset or account expressed in ...
  6. Capital Loss Coverage Ratio

    The difference between an asset’s book value and the amount received ...
Related Articles
  1. How To Make A Winning Long-Term Stock ...
    Investing Basics

    How To Make A Winning Long-Term Stock ...

  2. Finding Solid Buy-And-Hold Stocks
    Investing Basics

    Finding Solid Buy-And-Hold Stocks

  3. Long-Term Investing: Hot Or Not?
    Investing Basics

    Long-Term Investing: Hot Or Not?

  4. Forex: Finding Your Trading Style
    Forex Education

    Forex: Finding Your Trading Style

Hot Definitions
  1. Return On Sales - ROS

    A ratio widely used to evaluate a company's operational efficiency. ROS is also known as a firm's "operating profit margin". ...
  2. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  3. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  4. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  5. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  6. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
Trading Center