Economics Short Run Vs Long Run Costs Questions
Long-run costs impact a firm's profitability by influencing the firm's ability to adjust its production inputs and make strategic decisions. In the long run, a firm has the flexibility to change its scale of production, adjust its capital investments, and make changes to its production processes. By carefully managing long-run costs, a firm can optimize its production efficiency, reduce wastage, and improve its overall profitability. Additionally, long-run costs also impact a firm's ability to compete in the market, as firms with lower long-run costs can offer more competitive prices and potentially gain a larger market share, leading to increased profitability.