Short-run

Short-run

[shawrt-ruhn]
In economics, the concept of the short-run refers to the decision-making time frame of a firm in which at least one factor of production is fixed. Costs which are fixed in the short-run have no impact on a firms decisions. For example a firm can raise output by increasing the amount of labour through overtime.

A generic firm can make three changes in the short-run:

  • Increase production
  • Decrease production
  • Shut down

In the short-run, a profit maximizing firm will:

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