8.1 The Long Run: No Fixed Factors

In the short run, when at least one factor is fixed, the only way to adjust
output is to adjust the input of the variable factors. In the long run, when
all factors can be varied, there are numerous ways to produce any given
output. For example, the firm could use complex automated machines
and few workers, or simple machines and many workers. Thus, firms in
the long run must choose the type and amount of plant and equipment
and the size of their labour force.

In making these choices, the profit-maximizing firm will try to be
technically efficient , which means using no more of all inputs than
necessary—that is, the firm does not want to waste any of its valuable
inputs. For example, consider the situation faced by a crate-
manufacturing firm. If the firm is able to produce 100 crates per day by
using two machines and eight workers, the firm would be technically
inefficient if it decided instead to produce only 90 crates per day while still
employing the same amount of labour and capital. If the firm decides that
it wants to produce only 90 crates per day, technical efficiency requires
that it use fewer workers, fewer machines, or both.

Technical efficiency is not enough for profits to be maximized, however.
In order to maximize its profit, the firm must choose from among the
many technically efficient options the one that produces a given level of
output at the lowest cost. For example, if the firm decides to produce 100

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