![]() This process will occur whenever profits are different to 0. Economic profits will attract new entries to the market while economic losses will throw firms out of it. One of the key features of the long-run is the possibility of firms entering and/or exiting the market. The curve that joins the points of tangency between different isocost lines and isoquants is known as the expansion path. ![]() At each period we have a combination of labour and capital such that the firm will choose to minimise costs at each output level. Isoquants are used to compare the short-run periods with the long-run one. This long-run curve will be formed by different period short-run curves and will serve as an envelope for all of them. Period analysis tells us that in the long run all factors are variable this flexibility of factors will consequently be reflected in the long-run cost curves. Cost analysis in the long run is quite different from short run cost analysis.
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