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.

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.