with a calendar. It varies according to the specific business. Therefore, the distinction between the short run

and the long run is more technical: in the short run, firms cannot change the usage of fixed inputs, while in the

long run, the firm can adjust all factors of production.

In a competitive market, profits are a red cape that incites businesses to charge. If a business is making a profit

in the short run, it has an incentive to expand existing factories or to build new ones. New firms may start

production, as well. When new firms enter the industry in response to increased industry profits it is called

entry.

Losses are the black thundercloud that causes businesses to flee. If a business is making losses in the short

run, it will either keep limping along or just shut down, depending on whether its revenues are covering its
variable costs. But in the long run, firms that are facing losses will cease production altogether. The long-run
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