We examine firms’ decisions in the short run and in the long run. Why should a firm consider decisions both in the short run and the long run? That is, what information does considering the long run provide that just considering short run does not ?
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In the short run, firms face constraints such as fixed inputs and limited ability to adjust production levels. In contrast, the long run allows firms to adjust all inputs, including capital and labor, and to make strategic decisions about entering or exiting Show more…
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