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.
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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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.
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