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f there were 10 firms in this market, the short-run equilibrium price of copper would be L . Therefore, in the long run, firms would ]per pound. At that price, firms in this industry the copper market. vould_ 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 copper industry in long-run quilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. O Trựt

f there were 10 firms in this market, the short-run equilibrium price of copper would be L . Therefore, in the long run, firms would ]per pound. At that price, firms in this industry the copper market. vould_ 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 copper industry in long-run quilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. O Trựt

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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### Understanding the Copper Market Equilibrium **Graph Explanation:** The graph illustrates the market for copper with two supply lines and one demand line. The X-axis represents the quantity of copper in thousands of pounds, while the Y-axis shows the price in dollars per pound. - **Demand Line (Blue):** Slopes downward from left to right, indicating that as the price decreases, the quantity demanded increases. - **Supply Line (Purple) - 20 Firms:** Slopes upward, demonstrating that as the price increases, firms are willing to supply more copper. - **Supply Line (Green) - 30 Firms:** Represents an increased supply, possibly due to more firms entering the market, shifting the supply curve to the right. ### Market Analysis 1. **Short-Run Equilibrium:** - If there are 10 firms in the market, the short-run equilibrium price of copper would be $____ per pound. - At this price, firms might ________ incentives. - In the long run, firms would ________ the copper market due to changes in profitability. 2. **Long-Run Equilibrium:** - In a competitive market, firms earn zero economic profit in the long run. - The long-run equilibrium price must adjust to $____ per pound, ensuring no firm earns excess profit. - According to the graph, this results in ______ firms operating in the industry long term. 3. **True or False Question:** - Considering positive implicit costs, each firm in the industry earns positive accounting profit in the long run. - Options: - True - False This exercise explains how supply and demand balance in the copper industry and highlights the difference between short-run and long-run market dynamics for competitive industries.
Transcribed Image Text:### Understanding the Copper Market Equilibrium **Graph Explanation:** The graph illustrates the market for copper with two supply lines and one demand line. The X-axis represents the quantity of copper in thousands of pounds, while the Y-axis shows the price in dollars per pound. - **Demand Line (Blue):** Slopes downward from left to right, indicating that as the price decreases, the quantity demanded increases. - **Supply Line (Purple) - 20 Firms:** Slopes upward, demonstrating that as the price increases, firms are willing to supply more copper. - **Supply Line (Green) - 30 Firms:** Represents an increased supply, possibly due to more firms entering the market, shifting the supply curve to the right. ### Market Analysis 1. **Short-Run Equilibrium:** - If there are 10 firms in the market, the short-run equilibrium price of copper would be $____ per pound. - At this price, firms might ________ incentives. - In the long run, firms would ________ the copper market due to changes in profitability. 2. **Long-Run Equilibrium:** - In a competitive market, firms earn zero economic profit in the long run. - The long-run equilibrium price must adjust to $____ per pound, ensuring no firm earns excess profit. - According to the graph, this results in ______ firms operating in the industry long term. 3. **True or False Question:** - Considering positive implicit costs, each firm in the industry earns positive accounting profit in the long run. - Options: - True - False This exercise explains how supply and demand balance in the copper industry and highlights the difference between short-run and long-run market dynamics for competitive industries.
### 7. Short-run Supply and Long-run Equilibrium Consider the competitive market for copper. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. #### Graph Explanation: - **Axes:** - The vertical axis represents the COST ($/pound). - The horizontal axis represents QUANTITY (Thousands of pounds). - **Curves:** - **Marginal Cost (MC):** This curve is shown in orange. It starts high, dips to a low point at around 12,000 pounds, and then rises steeply. - **Average Total Cost (ATC):** This curve is green, slightly U-shaped, and intersects the MC curve at its lowest point, rising as quantity increases. - **Average Variable Cost (AVC):** Displayed in purple, this curve is also U-shaped. It lies below the ATC curve and intersects the MC curve before ATC does. The following diagram (not shown here) will illustrate the market demand for copper.
Transcribed Image Text:### 7. Short-run Supply and Long-run Equilibrium Consider the competitive market for copper. 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. #### Graph Explanation: - **Axes:** - The vertical axis represents the COST ($/pound). - The horizontal axis represents QUANTITY (Thousands of pounds). - **Curves:** - **Marginal Cost (MC):** This curve is shown in orange. It starts high, dips to a low point at around 12,000 pounds, and then rises steeply. - **Average Total Cost (ATC):** This curve is green, slightly U-shaped, and intersects the MC curve at its lowest point, rising as quantity increases. - **Average Variable Cost (AVC):** Displayed in purple, this curve is also U-shaped. It lies below the ATC curve and intersects the MC curve before ATC does. The following diagram (not shown here) will illustrate the market demand for copper.
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