Definition of Short-Run Cost

The short-run is a period of time in which the firm can vary its output by varying only the amount of variable factors such as labor and raw materials. In the short- run, fixed factors, such as capital, equipment, top management, etc. cannot be varied. If the firm wants to increase production in the short-run, it can do so only by overworking the existing plant, by hiring more workers and buying more raw materials. It cannot increase its output in the short-run by enlarging the size of the existing plant or building a new plant of a large size. The short-run is a period of time in which only variable factors can be varied, while fixed factors remain the same. The short-run costs are the costs at which the firm operates in the short-run.