3. Short-run supply and long-run equilibriumConsider the competitive market for ruthenium. Assume that no matter how many firms operate in the industry, every firm is identical and faces thesame marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph.COSTS (Dollars per pound)PRICE (Dollars per pound)8072645648403224168087206456488 12 16 20 24 28 32QUANTITY (Thousands of pounds)The following graph plots the market demand curve for ruthenium.40241680Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 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 20 firms. Finally, use the green points (triangle symbol) toplot the short-run industry supply curve when there are 30 firms.00 1204MC-ATCDemandTrueAVCFalse00D3640240 360 480 600 720 840 960 1080 1200QUANTITY (Thousands of pounds)?Supply (10 firms)143Supply (20 firms)ASupply (30 firms)If there were 30 firms in this market, the short-run equilibrium price of ruthenium would be $would. Therefore, in the long run, firms would?Because you know that competitive firms earn.economic profit in the long run, you know the long-run equilibrium price must beper pound. From the graph, you can see that this means there will be firms operating in the ruthenium industry in long-run$equilibrium.per pound. At that price, firms in this industrythe ruthenium market.True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns negative accounting profit.

Perfect competition is a market consisting of a large number of buyers and sellers. In this market…

If there were 30 firms in this market, the short-run equilibrium price of ruthenium would be $ would . Therefore, in the long run, firms would Because you know that competitive firms earn $ per pound. From the graph, you can see that this means there will be equilibrium. per pound. At that price, firms in this industry the ruthenium market. economic profit in the long run, you know the long-run equilibrium price must be firms operating in the ruthenium industry in long-run False 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

If there were 30 firms in this market, the short-run equilibrium price of ruthenium would be $ would . Therefore, in the long run, firms would Because you know that competitive firms earn $ per pound. From the graph, you can see that this means there will be equilibrium. per pound. At that price, firms in this industry the ruthenium market. economic profit in the long run, you know the long-run equilibrium price must be firms operating in the ruthenium industry in long-run False 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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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