# 6. Short-run Supply and Long-run EquilibriumConsider the competitive market for copper. 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.## Graph DescriptionThe graph illustrates costs associated with copper production:- **Axes:** - The horizontal axis represents quantity (in thousands of pounds). - The vertical axis represents costs (in dollars per pound).- **Curves:** - **MC (Marginal Cost):** A green curve that decreases initially and then increases. - **ATC (Average Total Cost):** An orange curve that starts above the AVC curve and decreases before rising again. - **AVC (Average Variable Cost):** A purple curve that starts below the ATC curve and follows a similar pattern, decreasing initially before rising.- **Cost Values:** - All cost curves cross around the 15-20 thousand pounds range and fluctuate between $10 and $100 per pound.The subsequent graph shows the market demand for copper.### Instructions for Plotting Supply Curves:- **Orange Points (Square Symbol):** Plot the initial short-run industry supply curve when there are 20 firms in the market. (Hint: Disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) - **Purple Points (Diamond Symbol):** Plot the short-run industry supply curve when there are 30 firms.- **Green Points (Triangle Symbol):** Plot the short-run industry supply curve when there are 40 firms.This information aids in understanding how industry supply curves adjust with different firm counts in the market. The graphic displays the market demand for copper and is accompanied by instructions for plotting short-run industry supply curves based on the number of firms in the market. **Instructions:**- **Orange Points (Square Symbol):** Plot the initial short-run supply curve for 20 firms. Ignore sections of the curve where there's no output.- **Purple Points (Diamond Symbol):** Plot the short-run supply curve for 30 firms.- **Green Points (Triangle Symbol):** Plot the short-run supply curve for 40 firms.**Graph Explanation:**- **Axes:** - **X-axis:** Quantity in thousands of pounds. - **Y-axis:** Price in dollars per pound.- **Demand Curve:** A downward-sloping line representing the demand for copper.- **Legend:** - **Orange Squares:** Supply with 20 firms. - **Purple Diamonds:** Supply with 30 firms. - **Green Triangles:** Supply with 40 firms.**Additional Information:**- With 20 firms, the short-run equilibrium price and the behavior of firms (whether to enter or exit the market) need to be determined.- In competitive markets, firms earn zero economic profit in the long run, indicating the equilibrium price and the number of firms operating at equilibrium.This instructional setup allows students to plot and analyze the shifting supply curves as the number of firms in the market changes, providing insights into market dynamics and competition.

P Qs Qs = N = 20 Qs = N = 30 Qs = N = 40 10 10 200 300 400 15 15 300 450 600 30 20 400 600 800…

90 80 70 60 50 40 ATC 30 20 AVC 10 MC O 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of pounds) he following graph shows the market demand for copper. se 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 isregard 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 urple points (diamond symbol) to plot the short-run industry supply curve when there are 30 firms. Finally, use the green points (triangle symbol) to COSTS (Dollars per pound)

90 80 70 60 50 40 ATC 30 20 AVC 10 MC O 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of pounds) he following graph shows the market demand for copper. se 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 isregard 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 urple points (diamond symbol) to plot the short-run industry supply curve when there are 30 firms. Finally, use the green points (triangle symbol) to COSTS (Dollars per pound)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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