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 candisregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use thepurple points (diamond symbol) to plot the short-run industry supply curve when there are 20 firms. Finally, use the green points (triangle symbol) toplot the short-run industry supply curve when there are 30 firms.PRICE (Dollars per pound)8072645648832+80Demand120 240 360 480 600 720 840 960 1080 1200QUANTITY (Thousands of pounds)Supply (10 firms)Because you know that competitive firms earn$Supply (20 firms)Supply (30 firms)If there were 30 firms in this market, the short-run equilibrium price of rhodium would be $wouldTherefore, in the long run, firms wouldper pound. At that price, firms in this industrythe rhodium market.economic profit in the long run, you know the long-run equilibrium price must befirms operating in the rhodium industry in long-run equilibrium.per pound. From the graph, you can see that this means there will be Consider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces thesame marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph.COSTS (Dollars per pound)80726456coo32+168004MC0ATCAVC8 12 16 20 24 28QUANTITY (Thousands of pounds)3238, 723640Ⓒ

The supply schedule is given below:The market for titanium with the supply curves is given below: If there are 30 firms then the equilibrium will occur where the green supply curve and demand curve will intersect each other. The equilibrium price will be $36 and the equilibrium quantity will be 900. Here, the quantity of 1 firm will be 30 (900/30 firms) and the ATC will be $44. Since the price is less than the ATC (36<44) it means the firms are earning losses in the short run. So many firms will leave the market in the long run.In the long run, the price is equal to the minimum of ATC because the firms earn only zero economic profit in the long run. This happens because of the property of free entry and exit of firms. Positive economic profits attract new firms, raising supply and reducing prices, while negative economic profits (losses) cause firms to exit and reduce supply and raise prices. From the graph of ATC, it can be seen that the minimum ATC is $44. So the price, in the long run, will be $44. In the market, the equilibrium at the price of $44 occurs when the orange supply curve (with 10 firms) and the demand curve intersect each other. So in the long run, 10 firms will operate in the market.

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Consider the competitive market for rhodium. 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.

Consider the competitive market for rhodium. 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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