Pure Competition in the Long Run
- explain how the long run differs from the short run in the purely competitive model
- describe how profits (or losses) drive the long-run adjustment process of pure competition
- explain the differences between constant-cost, increasing-cost, and decreasing-cost industries
It is impossible to precisely define the line between the short run and the long run with a stopwatch, or even with a calendar. It varies according to the specific business. Therefore, the distinction between the short run and the long run is more technical: in the short run, firms cannot change the usage of fixed inputs, while in the long run, the firm can adjust all factors of production.