Consider the competitive market for steel. Assume that, regardless of how many firms are in industry, every firm in the industry is identical and faces the marginal cost (MC), average tota (ATC), and average variable cost (AVC) curves shown on the following graph. COSTS (Dollars per ton) 80 72 64 56 48 40 32 24 16 8 0 0 3 MC ATC 0 AVC 0 0 9 12 15 18 QUANTITY (Thousands of tons) 21 24 27 30 The following diagram shows the market demand for steel. Use the orange points (square symbol) to plot the initial short-run industry supply curve wher there are 20 firms in the market. (Hint: You can disregard the portion of the supply curve tha corresponds to prices where there is no output since this is the industry supply curve.) Next, the purple points (diamond symbol) to plot the short-run industry supply curve when there ar firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply cur when there are 60 firms.

Consider the competitive market for steel. Assume that, regardless of how many firms are in industry, every firm in the industry is identical and faces the marginal cost (MC), average tota (ATC), and average variable cost (AVC) curves shown on the following graph. COSTS (Dollars per ton) 80 72 64 56 48 40 32 24 16 8 0 0 3 MC ATC 0 AVC 0 0 9 12 15 18 QUANTITY (Thousands of tons) 21 24 27 30 The following diagram shows the market demand for steel. Use the orange points (square symbol) to plot the initial short-run industry supply curve wher there are 20 firms in the market. (Hint: You can disregard the portion of the supply curve tha corresponds to prices where there is no output since this is the industry supply curve.) Next, the purple points (diamond symbol) to plot the short-run industry supply curve when there ar firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply cur when there are 60 firms.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Consider the 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.
COSTS (Dollars per ton)
80
72
64
56
48
40
32
24
16
8
0
0
MC
ATC
□
0
AVC
3 6
9 12 15 18
QUANTITY (Thousands of tons)
+
21
24 27 30
The following diagram shows the market demand for steel.
(?)
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.

PRICE (Dollars per ton)
80
72
64
56
48
40
32
24
16
8
0
0
Demand
120 240 360 480 600 720 840 960 1080 1200
QUANTITY (Thousands of tons)
Supply (20 firms)
Supply (40 firms)
Supply (60 firms)
True
False
(?)
If there were 60 firms in this market, the short-run equilibrium price of steel would be
$
per ton. At that price, firms in this industry would
Therefore, in the long run, firms would
the steel market.
Because you know that competitive firms earn
economic profit in the long run, you
know the long-run equilibrium price must be $
per ton. From the graph, you can see that
this means there will be firms operating in the steel 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.

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