# Questions tagged [long-run]

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1 vote
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### Capital Inflows and Outflows in the Long Run

What happens to capital inflows and outflows in the long run?
21 views

### INTERMEDIATE MACROECONOMIC THEORY- Fiscal Policy in the Long-Run (Classical) Closed Economy

Question 2: Fiscal Policy in the Long-Run (Classical) Closed Economy (58 marks) Consider the following Long-Run Closed Economy Model Natural Rate of Output: $Y = 11,851$ Total Demand: $YAD = C + I + G$...
1 vote
23 views

### Reference books that treat retirement savings/pension systems

I'm looking for references (preferably, although not limited to, books) that treat the topic of pension/retirement savings systems academically, in particular I'm interested in getting introduced to ...
21 views

### Long Run Model of Oligopolies After Recession

I am currently investigating about the long run impact of the COVID 19 to the US airline industry. Is there any specific (long-run) model that I can use for oligopolies (for 4 main companies)? Because ...
1 vote
247 views

### how does monopolisitic competition make profit in the long run in reality

guys, I have this doubt that if the fast food industry such as KFC, and Maccas are examples of monopolistic competition how are they still making a profit? Because as per the model in long run the ...
195 views

### Why do we omit the integral when deriving the f.o.c.’s in long-run growth models such as Romer (1990)?

For example when solving Romer’s model (1990) in continuous time, for the firm producing final goods, its production function is: $Y(t) = \int_{0}^{M(t)} (A(t) L_Y)^{1-\alpha} {x(i,t)}^{\alpha} di$, ...
21 views

### Does issuing new bonds tend to raise yields empirically?

Suppose a national government issues new long dated bonds (say 30y) to finance capital investment which leads to higher long term growth. For convenience purposes lets assume everything here is zero ...
163 views

### Long-run equilibrium number of firms is indeterminate when all firms in the industry share the same constant technology and factor prices are same

Why is the long-run equilibrium number of firms indeterminate when all firms in the industry share the same constant returns-to-scale technology and face the same factor prices? How to show it ...
406 views

### Why is the supply function the first derivative of the profit function in the long run?

We have the profit function of the firm profit = $p^2 -2p -399$. We take derivative of it we say that the output supply function is =$2p-2$ I understand that Profit = q*p - TC But why do we say the ...
36 views

### Mathematical expression for long run costs curves

I struggle to find formal mathematical expressions for long run average costs and long run marginal costs. All ressources I see take a finite number of short run average costs and draw the envelop ...
324 views

### How would a perfectly competitive industry respond to a macroeconomic demand shock in the long run?

In microeconomics, we are taught that in a perfectly competitive industry, the long-run industry supply curve is horizontal. This is because new firms would enter or exit until the profit is driven to ...
337 views

### How could real house prices tend to rise in the long-term?

It makes sense that house prices increase above the risk-free rate due to their risky nature and historical evidence and conventional wisdom seems to back up the idea that real house prices tend to ...
768 views

### Why is the number of firms in the short run fixed?

My textbook says that in perfect competition the condition of free entry and exit only applies to the long run equilibrium. Because in the short run no new firms can enter or old ones can leave the ...
1 vote
91 views

### Equivalence of producer surplus areas

I really can't understand how the sum of the rectangles leads to the sum of the triangle. My book's(Chapter 12, page 430) explanation is: Equivalence of these areas can be shown by recognizing that ...
1 vote
231 views

### Finding long run total cost function

I am trying to find the long run total cost function, given the firm's production function $y=L^α K^β$ where $α,β>0$ and two inputs $L$ and $K$ where $L,K∈R_+^2$, with factor prices $w$ and $r$ ...
66 views

### Sidrauski Monetary Model and Neutrality

In the Sidrausk model, money is in the long run super neutral. Does this result only apply to the case where money and consumption are separable in the utility function, or also to the case where they ...
96 views

### Difference between long run coefficient and non stochastic steady state coefficient ARDL model

I am a little bit confused on the definition of long run equilibrium coefficient. Suppose I have an ARDL model as: $y_t = \rho_1 y_{t-1} + \rho_2 y_{t-2} + \beta_1x_{t-1} + \beta_2x_{t-2}$ The steady ...
460 views

### Deriving long-run cost functions from production function

Suppose that I have a production function $(aK + bL)^3$ in a perfect competition where a and b are constants. I am confused on how to obtain the long-run cost function from this production function ...
1 vote
2k views

### Why isn't "long-run aggregate demand (or LRAD)" a thing?

To give you a sense of where I am in my understanding of economics, I've just learned about long-run aggregate supply in the neoclassical/monetarist view as a vertical curve. It occurred to me why ...
1 vote
607 views

### In the long run, would a production-possibility curve expand outward if the country preferred more consumer goods than capital goods?

PPC will not expand outward if the country preferred more consumer goods than capital goods. The total amount of resources in an economy at any given point of time is fixed. If a country ...
9k views

### Can the stock market grow faster than GDP indefinitely?

My understanding of conventional wisdom is that average long-term growth of advanced economies is expected to be significantly lower than the average long-term growth of the value of the largest firms ...
1 vote
716 views

### Is it possible that the minimum point of a short run cost curve does not touch the long run cost curve?

In the answer to this question, the answerer said "the minimum point of a short run cost curve will be above the long run cost curve". Is it true? If so, how would it be so? I thought that if e.g. ...
4k views

### Finding long run equilibrium price, quantity and number of firms with a linear average cost function

I've been been brushing up on my micoreocnomics lately and I came across a question in Perloff that looked really simple, but for some reason I am struggling to answer: Assume we are in the long run ...
345 views

### Accelerator and Multiplier effects at full employment

I have a question regarding the multiplier and accelerator effects. The way I see it, the value of the multiplier tends to be lower as the economy approaches full capacity. I would therefore expect ...
23k views

### How do I calculate quantity to minimize long-run average total cost?

I have a formula for the long-run total cost curve, $$TC(Q) = 6000Q + 40Q^2 + Q^3$$ and I'm trying to find the quantity that minimizes the long-run average total cost. I assume I'm trying to find ...
364 views

### How does the self-corecting mechanism put the economy back to long run equilibrium following a negative shock on the stick-wage SRAS?

According to some lecture notes, apparently it is possible for the economy to return to long run equilibrium if via the self-correcting mechanism if there is a temporary shock to the stick wage (...
124 views

### Why are the concepts of short-run and long-run equilibrium exclusive to aggregate supply and demand and macroeconomics?

Shouldn’t there also be a concept of short vs. long-run equilibrium in microeconomics? After all, short-run equilibrium describes the state of the economy when wages and prices are still adjusting and ...
114 views

### How to estimate long term exchange rate?

I'am looking for a book or paper that explain (in a theoretical and empirical way) how to estimate the long-run exchange rate for a country. Could someone suggest me one?
1 vote
997 views

### Why is there a structural deficit/surplus?

I'm going through Fiscal Policy and I'm reading about Structural Budget and Cyclical Budget. To my understanding, Cyclical Budget is what occurs when automatic fiscal policy is in use. So G and T are ...
1 vote
54 views

### Firms Entry/Exit Due to Economic Profit in a Perfectly Competitive Market

According to the textbooks,in a long run equilibrium, the market price will be equal to the minimum point of firm's ATC curve. But every firm's ATC curve will differ i.e each one of them will have ...
1 vote
8k views

### Number of firms in Long Run

In a competitive market, is it possible to know the change (increase/decrease) in number of firms in the Long run with a positive shift in demand for increasing costs case?
294 views

### What are the relationships between price stability and long term economic growth?

I was wondering what the links are between price stability and economic growth on the long term.
1 vote
655 views

### Is there any difference between using LRAC and LRATC in a long-run market structure diagram?

I am currently being taught to use average total cost (ATC) to label the U-shaped curve in the short-run on a market structure diagram, and long-run average cost (LRAC) for the equivalent curve in a ...
2k views

### Why do firm output decreases when fixed cost decreases in Long Run?

So in long run if fixed cost is lowered, more firms enter the industry and increase the supply, bringing up industrial output. According to the firm diagram, Average Cost lowered so that the firm ...
1 vote
3k views

### Difference between short run and long run supply curves?

We know that in short run supply curve is horizontal which means that prices remain rigid while quantity of supply adjusts according to demand. However, in long run this reverses. I know about some ...
532 views

### Short Run vs Long Run Cost Functions

Let $z_a$ and $z_b$ are two vectors of inputs. $z_a$ is variable in both long run and short run however $z_b$ is only variable in long run. Now let's suppose that the price of one of the inputs in ...
689 views

### What is the advantage and disadvantage of fiscal illusion policy in terms for the financial market?

What is the advantage and disadvantage of fiscal illusion policy for the financial market? Fiscal illusion suggests that when government revenues are not completely transparent or are not fully ...