7. Short-run supply and long-run equilibriumConsider the competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identicaland faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph.T2B4ATC40AVC16412 16 20 24 2832 36 40QUANTITY (Thousenda of pounds)Use the prange polots (square symbol) to plot the initial short-run industry supply curve when there pre 10 firms in the market. (Hint: You candisregard the portion of the supply curve that comesponds to prices where there is no cutput since this is the industry supply curve.) Next, use thepurple points (diamand symbol) to plat the short-run industry supply curve when there are 20 frms. Finally, use the green points (triangle symbal) topiot the short-run industry supply curve when there are 30 firms.(?72Supply (10 fima)DemandSupply (20 fims)32Supply (30 fims)* 2416120 240 2o 490 a00 r20 Be0 S60 1090 1200QUANTITY (Thousands of pounda)380If there were 20 firms in this market, the short-run equilibrium price of titanium would be sper pound. At that price, firms in this industrywould-. Therefore, in the long run, firms wouldv the titanium market.Because you know that competitive firms earnv economic profit in the long run, you know the long-run equilibrium price must beper pound. From the graph, you can see that this means there will be firms operating in the titanium 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.TrueO Falsead suog) Suso0

In perfect competition, a firm maximizes the profit where the price is equal to marginal cost,…

If there were 20 firms in this market, the short-run equilibrium price of titanium would be s per pound. At that price, firms in this industry would Therefore, in the long run, firms would the titanium 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 titanium industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms opereting in this industry in the long run earns positive accounting profit. True C False

If there were 20 firms in this market, the short-run equilibrium price of titanium would be s per pound. At that price, firms in this industry would Therefore, in the long run, firms would the titanium 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 titanium industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms opereting in this industry in the long run earns positive accounting profit. True C False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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