Final answer:
Economically, the long run is sufficient time for new firms to enter or existing firms to exit an industry. This is characterized by adjustments to economic profits or losses, leading to a zero-profit equilibrium where the marginal cost curve intersects the average cost curve at its minimum. The specific duration varies by industry.
Explanation:*
Economically speaking, the period of time sufficient for new firms to enter or for existing firms to exit an industry is referred to as the long run. In the context of perfectly competitive markets and monopolistically competitive industries, the long run is characterized by the time frame in which firms can freely enter or exit the market in response to economic profits or losses.
When firms in a monopolistically competitive industry are earning economic profits, the industry will become attractive for new entrants until the profits are normalized, or driven down to zero.
Conversely, if the firms are suffering economic losses, we will witness the exit of firms until such losses are mitigated, and economic profits return to zero.
This concept is centered on the principle that in the long run, the entry and exit of firms lead to a point where the price level allows firms to earn just enough to cover their average costs, including the normal profit, but not more. This is the zero-profit point where the marginal cost curve intersects with the average cost curve at its minimum.
There isn't a precise time frame that defines the long run as it can vary significantly depending on the industry's entry and exit barriers, capital intensity, and other market dynamics.
However, the underlying idea is that the long run is a period sufficient for all necessary adjustments to be made in the market including firm entry and exit. Comprehensive market adjustments contribute to the overall health of the economy, even though on an individual level the process may be challenging for the firms and employees involved.