7. Short-run supply and long-run equilibriumConsider the competitive market for titanium. 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 following graph. The following diagram shows the market demand for titanium.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. If there were 20 firms in this market, the short-run equilibrium price of titanium would be per pound. At that price, firms in this industry would . Therefore, in the long run, firms would the titanium 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 titanium 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 ### Graph ExplanationThis graph represents the relationship between costs and production quantity, specifically focusing on Marginal Cost (MC), Average Total Cost (ATC), and Average Variable Cost (AVC) in a typical firm’s production process.#### Axes:- **X-Axis:** Represents Quantity in thousands of pounds.- **Y-Axis:** Represents Costs in dollars per pound.#### Curves:- **MC (Marginal Cost):** Depicted in orange, the MC curve initially declines, reaching a minimum point, then rises, illustrating the typical cost behavior as production begins and continues to expand. - **ATC (Average Total Cost):** Shown in green, the ATC curve shows the average cost per unit of output, which initially declines as output increases due to the spreading of fixed costs, then eventually rises with increased production.- **AVC (Average Variable Cost):** Shown in purple, the AVC curve represents the variable costs per unit, initially declining and then rising as more variable inputs are required for increased output.#### Observations:- The MC curve intersects the AVC and ATC curves at their minimum points, which is a key economic principle indicating the cost-efficient level of output.- Both AVC and ATC curves are U-shaped, reflecting economies and diseconomies of scale.This graph is essential for understanding how costs behave relative to production levels and is useful for economic analysis regarding optimal production points for cost efficiency. The image is a graph displaying the demand and supply curves for a market, with the price on the vertical axis (in dollars per pound) and quantity on the horizontal axis (in thousands of pounds).### Details:- **Demand Curve**: - A blue line that slopes downward from left to right. - This shows the typical inverse relationship between price and quantity demanded, indicating that as the price decreases, the quantity demanded increases.- **Supply Curves**: - There are three supply lines, each represented by different symbols and colors: - **Orange squares**: Represents the supply curve when there are 10 firms in the market. - **Purple diamonds**: Represents the supply curve with 15 firms. - **Green triangles**: Represents the supply curve with 20 firms.- **Legend**: - Positioned on the right side of the graph. - This legend helps to identify which supply curve corresponds to the number of firms in the market. As the number of firms increases, the supply curve shifts to the right, indicating that more quantity is supplied at each price level due to higher competition or increased production capacity. This visually demonstrates how market supply can be affected by the number of firms within it.

The marginal cost (MC) curve is cut the minimum point of average variable cost (AVC). AVC is the…

7. Short-run supply and long-run equilibrium Consider the competitive market for titanium. 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 following graph. The following diagram shows the market demand for titanium. 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. If there were 20 firms in this market, the short-run equilibrium price of titanium would be per pound. At that price, firms in this industry would . Therefore, in the long run, firms would the titanium 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 titanium 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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7. Short-run supply and long-run equilibrium

Consider the competitive market for titanium. 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 following graph.

The following diagram shows the market demand for titanium.

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.

If there were 20 firms in this market, the short-run equilibrium price of titanium would be

per pound. At that price, firms in this industry would . Therefore, in the long run, firms would the titanium 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 titanium 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

### Graph Explanation

This graph represents the relationship between costs and production quantity, specifically focusing on Marginal Cost (MC), Average Total Cost (ATC), and Average Variable Cost (AVC) in a typical firm’s production process.

#### Axes:
- **X-Axis:** Represents Quantity in thousands of pounds.
- **Y-Axis:** Represents Costs in dollars per pound.

#### Curves:
- **MC (Marginal Cost):** Depicted in orange, the MC curve initially declines, reaching a minimum point, then rises, illustrating the typical cost behavior as production begins and continues to expand.

- **ATC (Average Total Cost):** Shown in green, the ATC curve shows the average cost per unit of output, which initially declines as output increases due to the spreading of fixed costs, then eventually rises with increased production.

- **AVC (Average Variable Cost):** Shown in purple, the AVC curve represents the variable costs per unit, initially declining and then rising as more variable inputs are required for increased output.

#### Observations:
- The MC curve intersects the AVC and ATC curves at their minimum points, which is a key economic principle indicating the cost-efficient level of output.
- Both AVC and ATC curves are U-shaped, reflecting economies and diseconomies of scale.

This graph is essential for understanding how costs behave relative to production levels and is useful for economic analysis regarding optimal production points for cost efficiency.

The image is a graph displaying the demand and supply curves for a market, with the price on the vertical axis (in dollars per pound) and quantity on the horizontal axis (in thousands of pounds).

### Details:

- **Demand Curve**:
- A blue line that slopes downward from left to right.
- This shows the typical inverse relationship between price and quantity demanded, indicating that as the price decreases, the quantity demanded increases.

- **Supply Curves**:
- There are three supply lines, each represented by different symbols and colors:
- **Orange squares**: Represents the supply curve when there are 10 firms in the market.
- **Purple diamonds**: Represents the supply curve with 15 firms.
- **Green triangles**: Represents the supply curve with 20 firms.

- **Legend**:
- Positioned on the right side of the graph.
- This legend helps to identify which supply curve corresponds to the number of firms in the market.

As the number of firms increases, the supply curve shifts to the right, indicating that more quantity is supplied at each price level due to higher competition or increased production capacity. This visually demonstrates how market supply can be affected by the number of firms within it.

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