jartsa said:
A fast muon thinks the distance to Earth is contracted and short.
Earth thinks the distance to the same muon is contracted and long.
Well, Earth should think that way IMHO. It should think: "Just by going into a different frame I can make the distance longer, the uncontracted distance is the longest of the distances in different frames."

Is it possible for the earh to make the distance longer?

Well, it's possible for the muon, so reciprocally it should be possible for the earth.
You can only appeal to reciprocity when the scenario is reciprocal (and symmetrical). We can change the scenario to one that is reciprocal and then we can apply Length Contraction equally.
So let's consider a spaceship that is 1000 feet long approaching the Earth at a speed of -99%c and we'll look at what happens as it reaches a point in the sky that is 1000 feet above the surface of the earth.
I'm going to draw some spacetime diagrams that are a little unusual in the sense that they have distance along the vertical axis and time along the horizontal axis. I think this will make it clearer in thinking about the spaceship coming straight down towards the Earth (or the Earth coming up straight towards the spaceship).
The surface of the Earth is shown as a green line with the point in the sky at 1000 feet in blue. The front end of the spaceship is shown as a black line and the rear in red. To begin with, I put the origin of the diagram at the point of contact between the black front of the spaceship and the blue point in the sky. That is why the surface of the Earth is at -1000 feet in the first diagram. The dots represent 1-microsecond intervals of time covering a range of just 2 microseconds. The speed of light is 1000 feet per microsecond.
Here's the first diagram showing the rest frame of the earth/sky:
Now I transform the coordinates of the first diagram to a frame moving at -99%c which is the rest frame of the spaceship:
If you compare these two diagrams, you will see that they are exactly reciprocal. The Lorentz Factor at 99%c is just over 7 so the time for the moving object is dilated meaning that 2 usecs of its Proper Time takes 14 usecs of Coordinate Time and the 1000-foot distance for the "objects" is Length Contracted from 1000 feet to 141 feet. Note also that because of the Relativity of Simultaneity, the Proper Time at one end of the object is offset from the other end of the object.
But to get closer to the situation for a muon, we need to use a shorter length for the spaceship. A muon is actually a very small fraction of a foot but I'm just going to shorten the length from 1000 feet to 100 feet so that you can see the trend:
Note now that the offset between the front and rear of the spaceship is one seventh of what it used to be and the distance between the black and red lines is not even visible on the diagram. I think you can see that if we went a million times smaller, there would be no practical difference between the black and the red lines. So this represents the first point of departure from a reciprocal scenario to one that is not reciprocal.
Next, we want to make several changes in the relationship between the surface of the Earth and the point in the sky. First, we want to make the point of contact (the origin) be the surface of the Earth and not someplace up in the sky. In fact we want to consider the point in the sky as being analogous to the creation of the muon and so it must occur much earlier so we need to extend the timeline of the earth/sky to 15 microseconds instead of only 2 microseconds. Here's the spacetime diagram for the final scenario:
Note that in the above diagram, the time for the Earth is the same as the Coordinate Time and the time when the spaceship arrives at the 14000-foot altitude above Earth is just over 14 microseconds before the time of impact with the surface of the earth. Note also that time for the spaceship is dilated so that 2 seconds on its clock is stretched out to just over 14 microseconds of Coordinate Time during its trip. Finally, note that the length of the spaceship has been contracted so that instead of 100 feet (which would be noticeable on the diagram) it is only 14 feet (which is not noticeable).
Now we want to see what this scenario looks like when we transform to the rest frame of the spaceship. I have to change the scale of the coordinates so that it will fit on the page:
Unfortunately, we lose all the important details so I'll zoom back into the same scale I had before and focus on the activity of the spaceship:
Now we can see that the time for the Earth and sky is dilated so that each microsecond of their Proper Time is stretched out to just over 7 microseconds of Coordinate Time. We can also see the Proper Length of the spaceship at 100 feet but the distance between the sky and the Earth is contracted from 14,000 feet to about 2000 feet.
So as you can see, Time Dilation and Length Contraction still apply to both the earth/sky frame and the spaceship frame, it's just that the Earth doesn't care about how the spaceship is Length Contracted (and especially for a muon that is billions of times smaller than a spaceship), the Earth only cares about the Time Dilation of the spaceship (or muon) so that it can survive a 14,000 foot trip at 99%c in only 2 microseconds of its time. Without Time Dilation, it would not even be able to get down to the 12,000-foot altitude.
And the spaceship (or muon) doesn't care about how time for the earth/sky is dilated (even though it is), it only cares about the Length Contraction of the distance between the sky at 14,000 feet and the surface of the Earth (at zero feet) which is contracted to about 2000 feet. So instead of the Earth starting out at 14,000 feet below it, it starts out at only 2000 feet below it and coming up at 99%c so that it only takes 2 microseconds of its own time for the Earth to reach the spaceship (or muon).
So the bottom line is that since the final scenario is not symmetrical and reciprocal, the details of how we apply both Time Dilation and Length Contraction are not the same in both frames like they were in the first symmetrical scenario.
Does that make it all perfectly clear? Any Questions?