6. Short-run supply and long run equilibrium The following graph represents a competitive market for truffles. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the graph. The following graph shows the market demand for truffles. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. COSTS (Dallars per bound) 72 04 AVC ° 20 24 40 QUANTITY (Thousands of pounds) PRICE (Dellars per pound ° 120 240 300 400 500 040 0 QUANTITY (Thousands of pounds) Supply (10 firms) Demand Supply (20 firms) Supply (30 firms) The following graph shows the market demand for truffles. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 firms in the market. (Hint: You can disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. If there were 20 firms in this market, the short-run equilibrium price of truffles would be S would Therefore, in the long run, firms would Because you know that competitive firms earn per pound. At that price, firms in this industry the truffles market. economic profit in the long run, you know the long-run equilibrium price must be per pound. From the graph, you can see that this means there will be firms operating in the truffles industry in long-run equilibrium.