If there were 30 firms in this market, the short-run equilibrium price of rhenium would be would .Therefore, in the long run, firms would per pound. At that price, firms in this industry the rhenium market.
If there were 30 firms in this market, the short-run equilibrium price of rhenium would be would .Therefore, in the long run, firms would per pound. At that price, firms in this industry the rhenium market.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The following graph plots the market demand curve for rhenium.
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)
80
72
64
56
48
40
32
24
16
8
Demand
0
0 120 240 360 480 800 720 840 980 1080 1200
QUANTITY (Thousands of pounds)
Because you know that competitive firms earn
Supply (10 firms)
Supply (20 firms)
If there were 30 firms in this market, the short-run equilibrium price of rhenium would be $
would
. Therefore, in the long run, firms would
True
Supply (30 firms)
False
per pound. From the graph, you can see that this means there will be
?
per pound. At that price, firms in this industry
the rhenium market.
economic profit in the long run, you know the long-run equilibrium price must be
firms operating in the rhenium 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.
Transcribed Image Text:7. Short-run supply and long-run equilibrium
Consider the competitive market for rhenium. 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)
80
72
64
56
48
40
32
24
16
8
O
0 3
ATC
0
AVC
D
0
O
MCD
8 9 12 15 18 21 24
QUANTITY (Thousands of pounds)
27 30
The following graph plots the market demand curve for rhenium.
(?)
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