From the Long Run to the Short Run

How do firms think about entering and exiting markets in the long run? In this lesson, Professor Andrew Simon discusses the differences between the short run and the long run in production decisions. He explains how, in the short run, firms can only adjust variable factors of production like labor and materials, while in the long run, all factors, including capital and buildings, can be adjusted. The lesson also covers important concepts like economies of scale, diseconomies of scale, and the conditions for firms to enter or exit a market, emphasizing how these factors influence firms’ long-term decisions.