Final answer:
The term 'long run' in business refers to a sufficient period during which firms can enter or exit the industry, leading to a new equilibrium where firms earn zero economic profits. This process is essential to industry dynamics and sustainability.
Step-by-step explanation:
From the industry's viewpoint, the long run includes enough time for existing firms to dissolve and leave the industry or for new firms to be created and enter the industry. In the context of a monopolistically competitive industry, the long run adjustment allows for industry dynamics where firms experiencing economic profits will see an entry of new competitors until profits normalize to zero. Conversely, if firms are suffering economic losses, the industry will witness an exit of firms until losses subside and reach a zero economic profit level as well.
Entry and exit of firms in the long run are significant because they ensure the industry reaches an equilibrium where firms earn normal profits. This long-run equilibrium state is important for the stability and sustainability of the industry. Different types of industries, such as constant-cost, increasing cost, and decreasing cost industries, respond differently to changes in demand concerning cost and pricing strategies in the long run.