Short-Run vs. Long-Run

Concepts

  • Fixed Costs
  • Variable Costs
  • Short-Run
    • Not Enough Time to Build Another Factory
    • Not Enough Time for New Firms to Enter the Industry
    • How many tacos should we produce?
  • Long-Run
    • Enough Time to Build Another Factory
    • Enough Time for New Firms to Enter the Industry
    • How many Taco Bells should we build?

Overview

In Microeconomics the short-run and the long-run are not separated by a clearly defined period of time that applies to all scenarios.  Instead, the short-run and the long-run are separated conceptually by this basic idea: fixed costs exist in the short-run, and in the long-run, all costs become variable.  Regardless of the amount of output produced, fixed costs stay constant (like rent).  Your landlord does not care if you make 5 tacos or 5,000 tacos, they just want that rent check every month until the lease expires.  Variable costs do change as more output gets produced (think taco shells).  If I produce more tacos, I will need to buy more taco shells.  In the short-run, there is not enough time to build another building and thus there is not enough time for rent to change.  In the long-run there is enough time to build another building and as a result, even rent becomes variable.  This time frame will be different industry by industry and firm by firm.  For example, it takes Boeing much longer to build an airplane factory than it does for Taco Bell to build another store.  As a result, Boeing’s short-run is going to be much longer than Taco Bell’s short-run.

Materials

Lecture

Short-Run vs. Long-Run Lecture

Quiz

Reminders Before Taking Quiz:

  • When you are asked “What Period?” please only put the one digit number of your class period. For example, if you have this class 1st period, just put 1 in the box for your response.
  • The password to login is CASE SENSITIVE, so please be conscious of this as you type in your password.
  • If it appears to be timing out when you login, try the following troubleshooting steps:
    1. Restart your phone (hard shut down and turn it back on)
    2. Turn off WiFi (access quiz through your data carrier)
    3. Click the “Classroom Link” provided in the initial email. Login, and then select this quiz from the list.

CLICK HERE TO TAKE QUIZ

Comments are closed.