7. Short-run supply and long-run equilibrium Consider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. COSTS (Dollars per pound) 20 ° 50 100 90 80 ATC AVC MC- 50 QUANTITY (Thousands of pounds) 80 100 The following graph plots the market demand curve for rhodium. 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 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. PRICE (Dollars per pound) 10 0 100 80 Supply (10 firms) Supply (15 firms) Supply (20 firms) Demand 375 600 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) If there were 10 firms in this market, the short-run equilibrium price of rhodium 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 rhodium 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 rhodium industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. True O False
7. Short-run supply and long-run equilibrium Consider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. COSTS (Dollars per pound) 20 ° 50 100 90 80 ATC AVC MC- 50 QUANTITY (Thousands of pounds) 80 100 The following graph plots the market demand curve for rhodium. 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 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. PRICE (Dollars per pound) 10 0 100 80 Supply (10 firms) Supply (15 firms) Supply (20 firms) Demand 375 600 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) If there were 10 firms in this market, the short-run equilibrium price of rhodium 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 rhodium 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 rhodium industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. True O False
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Hero expert bro Hand written solution is not allowed.
Transcribed Image Text:7. Short-run supply and long-run equilibrium
Consider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces the
same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph.
COSTS (Dollars per pound)
100
70
60
20
༄་ ིི་བླླ་ཐཱ་ཚོ་ཞ་བྷ་ནི་ རྨུ་ !
40
ATC
AVC
10
MC
0
0
10
20
30
40 50 60 70 80
90
QUANTITY (Thousands of pounds)
The following graph plots the market demand curve for rhodium.
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 15 firms. Finally, use the green points (triangle symbol) to
plot the short-run industry supply curve when there are 20 firms.
PRICE (Dollars per pound)
100
90
BO
70
60
Supply (10 firms)
Supply (15 firms)
•I• •
40
Supply (20 firms)
Demand
30
10
0
о
125
250
375 500 625 750 875 1000 1125 1250
QUANTITY (Thousands of pounds)
If there were 10 firms in this market, the short-run equilibrium price of rhodium would be $
. Therefore, in the long run, firms would
would
Because you know that competitive firms earn
per pound. At that price, firms in this industry
the rhodium 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 rhodium industry in long-run
equilibrium.
True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit.
True
False
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education