# 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

See similar textbooks

Similar questions

7. Short-run supply and long-run equilibrium Consider 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.
Suppose that the perfectly competitive turkey industry is in long-run equilibrium at a price of $3 per pound of turkey and a quantity of 600 million pounds per year. Suppose the Surgeon General issues a report saying that eating turkey is bad for your health. The Surgeon General's report will cause consumers to demand v turkey at every price. In the short run, firms will respond by Shift the supply curve, the demand curve, or both on the following diagram to illustrate these short-run effects of the Surgeon General's announcement. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move curve and it snaps back to its original position, just drag it a little farther. (?) Supply 5 Demand Supply Demand 200 400 600 800 1000 1200 QUANTITY (Millions of pounds) PRICE (Dollars per pound)
QUESTION 33 Consider a major producer of liquid soap. Which of the following would not shift its supply curve of liquid soap inward (to the left)? O a. A substitute in supply becomes more profitable O b. Environmental regulations requiring the producer to use a more costly technology to produce liquid soap O c. An increase in the wage rate for factory workers who produce liquid soap O d. A decrease in the price of liquid soap
The table below shows cost data for a Aurora Cannabis, which sells marijuana in a perfectly competitive market. If the price of marijuana is $25 an ounce, Aurora will: Output O 1 23 4 5 6 7 Total cost $50 90 120 140 170 210 260 330
Q13
Price and costs (dollars) 20 16 12 8 4 0 5 10 MC ATC 20 15 Quantity (per day) The figure above shows short-run cost curves for a perfectly competitive firm. If the price of the product is $8, in the short run the firm will Select one: O a. incur an economic loss O b. earn an economic profit O c. earn a normal profit O d. None of the provided answers is correct because more information is needed to determine the firm's profit or loss
6. Short-run supply and long-run equilibrium Consider the perfectly competitive market for steel. 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 64 56 ATC 48 40 32 24 18 AVC 8 MC O 12 15 18 21 24 27 30 QUANTITY (Thousands of tons) COSTS (Dollars per ton) 3.
Assume that restaurants in aiports rent the space that they occupy and that the restaurant industry is competitive. Keeping in mind the concept of economic rent, we know that food prices will be higher at the airport restaurants than at other locations because: O airport restaurants generate larger economic profits than other restaurants at different locations. O the number of potential customers is greater at the airport locations. O the rent paid by the restaurant is higher than the rent paid at other locations. O demand for food at airports is less elastic than at other locations.
Consider the competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. (? 100 06 80 70 60 ATC 50 40 30 AVC 20 + MC O 10 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of shirts) For each price in the following table, use the graph to determine the number of shirts this firm would produce in order to maximize its profit. Assume that when the price is exactly equal to the average variable cost, the firm is indifferent between producing zero shirts and the profit-maximizing quantity. Also, indicate whether the firm will produce, shut down, or be indifferent between the two in the short run. Lastly, determine whether it will make a profit, suffer a loss, or break even at each price. Price Quantity (Dollars per shirt) (Shirts) Produce or Shut Down? Profit or Loss? 15 20 25 55 70 85 COSTS (Dollars)
# 6
er 11 i Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be Multiple Choice OO O the same as the initial equilibrium price, but the new industry output will be greater than the original output. greater than the initial price, and the new industry output will be greater than the original output. less than the initial price, but the new industry output will be greater than the original output. the same as the initial equilibrium price, and the industry output will remain unchanged. 23 11,229 X OCT all Z A
Each widget firm has the cost structure illustrated in the left graph below. The right graph illustrates two different possible demand curves for widgets, D1 and D2. MC ATC D2 AVC D1 0123456789 10 11 400 1200 1500 2000 2400 2000 Suppose the required assumptions for a perfectly elastic long run supply curve hold for the widget industry. Also, assume that the demand for widgets is depicted by the demand curve D1, and that the industry is in long-run equilibrium. What is the long- run output (quantity produced) for the entire industry? O 1600 1200 2000 O 800 O 400 Previous