The Short Run: Fixed Plant
The time frame in which the quantities of some resources (fixed
factors of production) are fixed. For most firms, the fixed resources are
the firm’s technology and capital- its equipment and buildings. To
increase output in short run, a firm must increase the quantity of
variable factors of production e.g. number of labor or hours it hires.
Long Run: Variable Plant
The time frame in which the quantities of all resources (factors of
production) can be varied. So, in long run, the firm can change its
plant.
For many firms, the division of total costs between fixed and variable
costs depends on the time horizon being considered.
In the short run, some costs are fixed.
In the long run, all fixed costs become variable costs.