Answer:-
The "long run" is a term used in economics to refer to a period during which all factors of production and costs are variable. In the long run, firms can adjust their production levels and scale of operations, and all inputs, including capital and labor, can be varied to adapt to changing market conditions.
Key characteristics of the long run include:
(1). All Inputs Are Variable: Unlike the short run, where some inputs are fixed (such as plant capacity or specialized machinery), in the long run, all inputs can be adjusted. This flexibility allows firms to change their production processes and scale.
(2). No Fixed Constraints: In the long run, there are no fixed constraints that limit a firm's ability to enter or exit an industry, change its production capacity, or adopt new technologies. Firms can build new facilities, enter new markets, or exit existing ones.
(3). Adjustment to Changing Demand: Firms have the ability to respond to changes in demand by expanding or contracting their production capabilities. They can enter or exit markets based on profitability.
(4). No Fixed Costs: Fixed costs, which are costs that do not vary with the level of production, become variable in the long run. For example, in the short run, a firm might have a fixed lease cost for a factory, but in the long run, it can choose a different, more suitable location or adjust the size of its facilities.
The concept of the long run is essential for understanding how firms make decisions about their production levels, plant capacity, and market presence over an extended period, considering the flexibility to adapt to changing economic conditions.