Question

Distinguish Between short-run and long-run.

State any two differences between short-run and long-run costs.

Answer 1

Sr. No.	Basis	Short run	Long run
1.	Definition	It is a period in which at least one factor is fixed.	It is a period in which all factors can be varied.
2.	Nature of factors	Has both fixed and variable factors.	All factors are variable.
3.	Plant size	Plant size is fixed; no change in machinery or building.	Plant size can be changed; a firm can install new machinery or buildings.
4.	Output adjustment	Output is changed by varying only variable inputs.	Output is changed by varying all inputs.
5.	Flexibility	Limited flexibility in production adjustments.	Full flexibility to adjust production scale.
6.	Time frame	Not defined by a specific time; may vary by industry (e.g., a few months or years).	Also not fixed; depends on how long it takes to vary all inputs.
7.	Example	Adding more labor to existing machines.	Setting up a new factory or buying more machines.