Answered: 72 Supply (20 fems) 04 Demand 48 Supply…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If there were 60 firms in this market, the short-run equilibrium price of titanium would be $________ per kilogram. At that price, firms in this industry would (earn a positive profit, shut down, earn zero profit, operate at a loss). Therefore, in the long run, firms would ( enter, exit, neither enter nor exit) the titanium market.

Because you know that perfectly competitive firms earn (positive, zero, negative) economic profit in the long run, you know the long-run equilibrium price must be $_______ per kilogram. From the graph, you can see that this means there will be (20, 40, 60) firms operating in the titanium industry in long-run equilibrium.

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 40 firms. Finally, use the green points (triangle symbol) to
plot the short-run industry supply curve when there are 60 firms.
Note: Points will snap to the quantities of output
80
72
Supply (20 firms)
84
50
Demand
48
Supply (40 firms)
40
32
Supply (60 firms)
18
118
240 358 480 508 720 838 000 1078 1200
QUANTITY (Thousands of kilograms)
If there were 60 firms in this market, the short-run equilibrium price of titanium would be S
per kilogram. At that price, firms in this industry
would
Therefore, in the long run, firms would
the titanium market.
Because you know that perfectly competitive firms earn
economic profit in the long run, you know the long-run equilibrium price must
be5
] per kilogram. 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: Each of the firms operating in this industry in the long run earns negative accounting profit.
O True
O False
PRICE (Dollars per kilogram)

Consider the perfectly 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.
80
72
04
50
ATC
40
32
24
10
AVC
MC O
3
12
15 18 21
24
27
30
QUANTITY (Thousands of kilograms)
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 20 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 40 firms. Finally, use the green points (triangle symbol) to
plot the short-run industry supply curve when there are 60 firms.
Note: Points will snap to the quantities of output
COSTS (Dollars per kilogram)

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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