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S'Mores Pie, Marshmallows, & an Explanation of Short- and Long-Run Firm Decisions



About midway through the semester of a microeconomics class, we start talking about “long-run” and “short-run” decision making. This concept can often be a confusing one. What is long run? A year, two years, ten years? Or is it a day? Like many things in your economics class, the answer requires a little more thought. In fact, on a multiple-choice test the answer would be “any of the above are possible.”


To tackle this question, let’s talk about marshmallows. And, specifically, a company that sells gourmet marshmallows.


For three years I lived in this awesome little town in New York. It was even named one of the coolest small towns in America. Way cooler than I am. I lived right on Main Street above a storefront. The previous downstairs occupant moved out, and what was moving in? A gourmet marshmallow company.


Gourmet marshmallows: I was pretty excited about it. I imagined a hot chocolate bar where you could pick out your marshmallows. I already had my go-to coffee shop in town, but maybe once in a while in the winter I might want a fancy hot chocolate. A few months later the store opened up, and it was super cute. There was no hot chocolate (at first), BUT you could buy mini s’mores!* Even better, any time I wanted marshmallows (which turns out to not be very often, and I never once got a s’more), they would be open. Their hours were from around 10am-8pm, EVERY DAY of the week.


Living above the marshmallow company, I often walked by it on the weekends. The sad thing was… there were rarely people in it. People strolling by made comments on how cute it was. However, if they were walking from the train arriving from NYC, they had already walked by a delicious coffee shop, ice cream shop, and popsicle shop. They probably weren’t in the market for overpriced balls of sugar, gelatin, and corn syrup.