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. 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 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 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. ### Market for Steel: Pricing and Equilibrium Analysis#### Graph ExplanationThe graph illustrates the relationship between the Price of steel (in dollars per ton) and the Quantity supplied (in thousands of tons) under different market conditions:- **Demand Curve**: This downward-sloping line indicates the relationship between the price consumers are willing to pay and the quantity they demand. As the price decreases, the quantity demanded increases. - **Supply Curves**: - **Supply (10 firms)**: Represented by an orange square symbol - **Supply (15 firms)**: Represented by a purple triangle symbol - **Supply (20 firms)**: Represented by a green diamond symbolEach supply curve reflects a different number of firms in the market, with more firms resulting in a higher quantity supplied at any given price.#### Analysis of Market Scenarios1. **Short-Run Equilibrium With 10 Firms**: - If there were 10 firms in this market, the short-run equilibrium price of steel would be **$__** per ton. At that price, firms in this industry would **__**. Therefore, in the long run, firms would **__** the steel market.2. **Long-Run Equilibrium Considerations**: - Because you know that competitive firms earn **zero** economic profit in the long run, you know the long-run equilibrium price must be **$__** 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/False Statement- **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 The following diagram shows the market demand for steel.[Description of the Diagram]The diagram features a graph plotting three cost curves against quantity: Marginal Cost (MC), Average Total Cost (ATC), and Average Variable Cost (AVC). - The x-axis represents the quantity of steel in thousands of tons.- The y-axis represents the cost in dollars per ton.Each curve is color-coded and labeled:- The MC curve is shown in yellow.- The ATC curve is shown in green.- The AVC curve is shown in purple.Orange square points are plotted on the MC curve to indicate various quantities and costs along the curve:- One point is around the quantity of 15, at a cost of about $15 per ton.- The next point appears around a quantity of 27, at a cost of about $47 per ton.- Subsequent points follow at intervals indicating higher costs and quantities.The textual explanation associated with the diagram reads as follows:---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 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms.

The demand curve and supply curve are fundamental concepts in economics that graphically represent…

Answered: Consider the competitive market for…

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC