91Ó°ÊÓ

First, the definition of short-run equilibrium should be presented. In economics, the short-run is a period of time in which the quantities of some resources are fixed. Therefore, a short-run equilibrium occurs when the quantity demanded equals the quantity supplied, determined by the intersection of the supply and demand curves (at that specific point in time). This equilibrium reflects the prevailing price at which quantity demanded matches quantity supplied.

Next, the exercise calls for the definition of long-run equilibrium. Unlike the short-run, the long-run is a theoretical timeframe in which all factors of production are variable. A long-run equilibrium occurs when all firms in the industry are making zero economic profit. In other words, in the long-run equilibrium, firms will enter the market if the incumbent firms are making above average profit and likewise, firms will exit if they are making less than the average profit.

The difference between short-run and long-run equilibrium are as follows: \n\n1. Time Frame: Short-run equilibrium reflects a state of balance at a specific point in time, while long-run equilibrium is a state that prevails over time, assuming all factors of production are variable. \n\n2. Profit levels: In short-run equilibrium, firms can make above normal profits or face losses depending on the market conditions whereas in the long-run equilibrium, all firms make normal profit. \n\n3. Resource Adjustments: In short-run equilibrium, at least one factor of production is fixed, and firms cannot adjust all their resources in response to market changes. On the other hand, in long-run equilibrium, firms are fully adaptable and can alter all their resources according to market changes.