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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. 100 90 80 70 COSTS (Dollars per pound) 8 50 40 ຊ 20 10, 10 10 + MC ATC AVC Π 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of pounds) (?) The following graph plots the market demand curve for rhodium. 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 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. 100 PRICE (Dollars per pound) 90 80 50 2889 70 60 Supply (10 firms) Supply (20 firms) 40 Supply (30 firms) Demand 30 20 10 10 0 + 0 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) would earn zero profit If there were 20 firms in this market, the short-run equilibrium price of rhodium would be . Therefore, in the long run, firms would neither enter nor exit $40 per pound. At that price, firms in this industry the rhodium 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 rhodium 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

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. 100 90 80 70 COSTS (Dollars per pound) 8 50 40 ຊ 20 10, 10 10 + MC ATC AVC Π 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of pounds) (?) The following graph plots the market demand curve for rhodium. 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 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. 100 PRICE (Dollars per pound) 90 80 50 2889 70 60 Supply (10 firms) Supply (20 firms) 40 Supply (30 firms) Demand 30 20 10 10 0 + 0 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) would earn zero profit If there were 20 firms in this market, the short-run equilibrium price of rhodium would be . Therefore, in the long run, firms would neither enter nor exit $40 per pound. At that price, firms in this industry the rhodium 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 rhodium 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

Economics:
Economics:
10th Edition
ISBN:9781285859460
Author:BOYES, William
Publisher:BOYES, William
Chapter23: Profit Maximization
Section: Chapter Questions
Problem 6E
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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. 100 90 80 70 COSTS (Dollars per pound) 8 50 40 ຊ 20 10, 10 10 + MC ATC AVC Π 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of pounds) (?)
Transcribed Image Text: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. 100 90 80 70 COSTS (Dollars per pound) 8 50 40 ຊ 20 10, 10 10 + MC ATC AVC Π 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of pounds) (?)
The following graph plots the market demand curve for rhodium. 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 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. 100 PRICE (Dollars per pound) 90 80 50 2889 70 60 Supply (10 firms) Supply (20 firms) 40 Supply (30 firms) Demand 30 20 10 10 0 + 0 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) would earn zero profit If there were 20 firms in this market, the short-run equilibrium price of rhodium would be . Therefore, in the long run, firms would neither enter nor exit $40 per pound. At that price, firms in this industry the rhodium 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 rhodium 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
Transcribed Image Text:The following graph plots the market demand curve for rhodium. 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 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. 100 PRICE (Dollars per pound) 90 80 50 2889 70 60 Supply (10 firms) Supply (20 firms) 40 Supply (30 firms) Demand 30 20 10 10 0 + 0 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) would earn zero profit If there were 20 firms in this market, the short-run equilibrium price of rhodium would be . Therefore, in the long run, firms would neither enter nor exit $40 per pound. At that price, firms in this industry the rhodium 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 rhodium 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
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