7. Short-run supply and long-run equilibrium Consider the competitive market for ruthenium. 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. COSTS (Dollars per pound) 100 90 80 70 60 50 40 30 20 10 0 0 MC 5 ATC AVC + + 10 15 20 25 30 35 QUANTITY (Thousands of pounds) 40 45 H 50 image 1 The following graph plots the market demand curve for ruthenium. 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. PRICE (Dollars per pound) 100 90 80 70 60 50 40 30 20 10 0 0 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) equilibrium. Demand Supply (10 firms) True Supply (20 firms) If there were 20 firms in this market, the short-run equilibrium price of ruthenium would be $ would Therefore, in the long run, firms would False Supply (30 firms) (c. 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 ruthenium industry in long-run $ image 2 per pound. At that price, firms in this industry the ruthenium market. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit.
7. Short-run supply and long-run equilibrium Consider the competitive market for ruthenium. 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. COSTS (Dollars per pound) 100 90 80 70 60 50 40 30 20 10 0 0 MC 5 ATC AVC + + 10 15 20 25 30 35 QUANTITY (Thousands of pounds) 40 45 H 50 image 1 The following graph plots the market demand curve for ruthenium. 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. PRICE (Dollars per pound) 100 90 80 70 60 50 40 30 20 10 0 0 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) equilibrium. Demand Supply (10 firms) True Supply (20 firms) If there were 20 firms in this market, the short-run equilibrium price of ruthenium would be $ would Therefore, in the long run, firms would False Supply (30 firms) (c. 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 ruthenium industry in long-run $ image 2 per pound. At that price, firms in this industry the ruthenium market. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:7. Short-run supply and long-run equilibrium
Consider the competitive market for ruthenium. 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.
COSTS (Dollars per pound)
100
90
80
70
60
50
40
30
20
10
0
0
MC
5
ATC
AVC
+
+
10 15 20
25 30 35
QUANTITY (Thousands of pounds)
40
45
H
50
image 1
Transcribed Image Text:The following graph plots the market demand curve for ruthenium.
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.
PRICE (Dollars per pound)
100
90
80
70
60
50
40
30
20
10
0
0
125 250 375 500 625 750 875 1000 1125 1250
QUANTITY (Thousands of pounds)
equilibrium.
Demand
Supply (10 firms)
True
Supply (20 firms)
If there were 20 firms in this market, the short-run equilibrium price of ruthenium would be $
would
Therefore, in the long run, firms would
False
Supply (30 firms)
(c.
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 ruthenium industry in long-run
$
image 2
per pound. At that price, firms in this industry
the ruthenium market.
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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