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7. Short-run supply and long-run equilibrium Consider the competitive market for thenium. 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. 100 31 30 20 20 21 50 MCO AVC 0 D 30 10 20 20 TD QUANTITY (Thousands of pounds) 20 100 The following graph plots the market demand curve for rhenium. ? 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 pint the short-run industry supply curve when there are 20 firms. 100 12 43 Demand 33 33 ☐ ° A 13 0 D 125 250 375 500 125 750 875 100 1125 120 QUANTITY (Thousands of pounds) • Supply (104me) Supply (15 mm) Supply (20) If there were 20 firms in this market, the short-run equilibrium price of rhenium would be would Therefore, in the long run, firms would per pound. At that price, firms in this industry. the rhenium market. Because you know that competitive firms earn 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 rhenium 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. O True False

7. Short-run supply and long-run equilibrium Consider the competitive market for thenium. 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. 100 31 30 20 20 21 50 MCO AVC 0 D 30 10 20 20 TD QUANTITY (Thousands of pounds) 20 100 The following graph plots the market demand curve for rhenium. ? 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 pint the short-run industry supply curve when there are 20 firms. 100 12 43 Demand 33 33 ☐ ° A 13 0 D 125 250 375 500 125 750 875 100 1125 120 QUANTITY (Thousands of pounds) • Supply (104me) Supply (15 mm) Supply (20) If there were 20 firms in this market, the short-run equilibrium price of rhenium would be would Therefore, in the long run, firms would per pound. At that price, firms in this industry. the rhenium market. Because you know that competitive firms earn 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 rhenium 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. O True False

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter8: Perfect Competition
Section: Chapter Questions
Problem 41P: A computer company produces affordable, easy-to-use home computer systems and has fixed costs of...
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7. Short-run supply and long-run equilibrium Consider the competitive market for thenium. 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. 100 31 30 20 20 21 50 MCO AVC 0 D 30 10 20 20 TD QUANTITY (Thousands of pounds) 20 100 The following graph plots the market demand curve for rhenium. ? 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 pint the short-run industry supply curve when there are 20 firms. 100 12 43 Demand 33 33 ☐ ° A 13 0 D 125 250 375 500 125 750 875 100 1125 120 QUANTITY (Thousands of pounds) • Supply (104me) Supply (15 mm) Supply (20) If there were 20 firms in this market, the short-run equilibrium price of rhenium would be would Therefore, in the long run, firms would per pound. At that price, firms in this industry. the rhenium market. Because you know that competitive firms earn 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 rhenium 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. O True False
Transcribed Image Text:7. Short-run supply and long-run equilibrium Consider the competitive market for thenium. 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. 100 31 30 20 20 21 50 MCO AVC 0 D 30 10 20 20 TD QUANTITY (Thousands of pounds) 20 100 The following graph plots the market demand curve for rhenium. ? 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 pint the short-run industry supply curve when there are 20 firms. 100 12 43 Demand 33 33 ☐ ° A 13 0 D 125 250 375 500 125 750 875 100 1125 120 QUANTITY (Thousands of pounds) • Supply (104me) Supply (15 mm) Supply (20) If there were 20 firms in this market, the short-run equilibrium price of rhenium would be would Therefore, in the long run, firms would per pound. At that price, firms in this industry. the rhenium market. Because you know that competitive firms earn 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 rhenium 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. O True False
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