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Marshall's original introduction of long-run and short-run economics reflected the 'long-period method' that was a common analysis used by classical political economists. However, early in the 1930s, dissatisfaction with a variety of the conclusions of Marshall's original theory led to methods of analysis and introduction of equilibrium notions.
The long-run marginal cost curve is shaped by returns to scale, a long-run concept, rather than the law of diminishing marginal returns, which is a short-run concept. The long-run marginal cost curve tends to be flatter than its short-run counterpart due to increased input flexibility.
The principal difference between short run and long run profit maximization is that in the long run the quantities of all inputs, including physical capital, are choice variables, while in the short run the amount of capital is predetermined by past investment decisions. In either case, there are inputs of labor and raw materials.
A firm making profits in the short run will nonetheless only break even in the long run because demand will decrease and average total cost will increase, meaning that in the long run, a monopolistically competitive company will make zero economic profit. This illustrates the amount of influence the company has over the market; because of brand ...
Long Run Marginal Cost. The long run is defined as the length of time in which no input is fixed. Everything, including building size and machinery, can be chosen optimally for the quantity of output that is desired. As a result, even if short-run marginal cost rises because of capacity constraints, long-run marginal cost can be constant.
Going long vs. going short. The distinction between going long and going short is brief but important: Being long a stock means that you own it and will profit if the stock rises.
A long-run average cost curve is typically downward sloping at relatively low levels of output, and upward or downward sloping at relatively high levels of output. Most commonly, the long-run average cost curve is U-shaped, by definition reflecting economies of scale where negatively sloped and diseconomies of scale where positively sloped.
Short-term vs. long-term goals: Best savings strategies to use for each. René Bennett. September 30, 2024 at 10:20 AM ... the easier it will be to reach your retirement savings goals in the long run.