Long run
Topic: Production Function, Returns and Costs · NCERT: Class 12, Ch 3 "Production and Costs"
Meaning
The long run is a period in which a firm can change all its inputs, including plant size and machinery. So there is no fixed factor, and therefore no fixed cost; TC = TVC. The long run is not a set number of months or years. It depends on how long a given process needs to change every input. In the long run the firm can change its scale of production, so returns to scale apply.
Example
A tea stall can add a stove and a bench within weeks, so its long run is short. A steel plant needs years to add a blast furnace, so its long run is much longer.
Don't confuse with
- Short run: at least one input is fixed in the short run. The difference is whether all inputs can be changed, not calendar time.