Consider the competitive market for copper. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical andfaces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph.100908070605040ATC3020AVC10MC O101520253035404550QUANTITY (Thousands of pounds)COSTS (Dollars per pound) The following diagram shows the market demand for copper.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 candisregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use thepurple points (diamond symbol) to plot the short-run industry supply curve when there are 30 firms. Finally, use the green points (triangle symbol) toplot the short-run industry supply curve when there are 40 firms.10090Supply (20 firms)807060Supply (30 firms)5040Supply (40 firms)Demand302010125250375500625750875 1000 1125 1250QUANTITY (Thousands of pounds)If there were 30 firms in this market, the short-run equilibrium price of copper would be $per pound. At that price, firms in this industrywouldTherefore, in the long run, firms wouldthe copper market.Because you know that competitive firms earneconomic 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 befirms operating in the copper industry in long-runequilibrium.True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns negative accounting profit.O TrueFalsePRICE (Dollars per pound)

In a perfectly competitive market, supply curve is the same as the marginal cost curve of the firm…

If there were 30 firms in this market, the short-run equilibrium price of copper would be ]per pound. At that price, firms in this industry . Therefore, in the long run, firms would would the copper 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 copper 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 negative accounting profit. O True O False

If there were 30 firms in this market, the short-run equilibrium price of copper would be ]per pound. At that price, firms in this industry . Therefore, in the long run, firms would would the copper 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 copper 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 negative accounting profit. O True O 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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