7. Short-run supply and long-run equilibriumConsider the perfectly competitive market for copper. Assume that, regardless of how many firms are in the industry, every firm in the industry isidentical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph.COSTS (Dollars per kilogram)80726456484032168004MC8ATCAVC□12 16 20 24 28 32QUANTITY (Thousands of kilograms)36The following diagram shows the market demand for copper.□40?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 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. plot the short-run industry supply curve when there are 30 firms.Note: Points will snap to the quantities of output.PRICE (Dollars per kilogram)807264564840322416800 118 240 358 480 598 720 838 960 1078 1200QUANTITY (Thousands of kilograms)DemandSupply (10 firms)TrueSupply (20 firms)If there were 20 firms in this market, the short-run equilibrium price of copper would be $wouldTherefore, in the long run, firms wouldFalseSupply (30 firms)?Because you know that perfectly competitive firms earnbe $equilibrium.economic profit in the long run, you know the long-run equilibrium price mustper kilogram. From the graph, you can see that this means there will be firms operating in the copper industry in long-runper kilogram. At that price, firms in this industrythe copper market.True or False: Each of the firms operating in this industry in the long run earns positive accounting profit.

Supply Curve is the curve that denotes the different levels of quantity that a producer is willing…

plot the short-run industry supply curve when there are 30 firms. Note: Points will snap to the quantities of output. PRICE (Dollars per kilogram) 80 72 64 56 48 40 32 24 16 8 0 0 118 240 358 480 598 720 838 960 1078 1200 QUANTITY (Thousands of kilograms) Demand Supply (10 firms) True Supply (20 firms) If there were 20 firms in this market, the short-run equilibrium price of copper would be $ would Therefore, in the long run, firms would False Supply (30 firms) ? Because you know that perfectly competitive firms earn be $ equilibrium. economic profit in the long run, you know the long-run equilibrium price must per kilogram. From the graph, you can see that this means there will be firms operating in the copper industry in long-run per kilogram. At that price, firms in this industry the copper market. True or False: Each of the firms operating in this industry in the long run earns positive accounting profit.

plot the short-run industry supply curve when there are 30 firms. Note: Points will snap to the quantities of output. PRICE (Dollars per kilogram) 80 72 64 56 48 40 32 24 16 8 0 0 118 240 358 480 598 720 838 960 1078 1200 QUANTITY (Thousands of kilograms) Demand Supply (10 firms) True Supply (20 firms) If there were 20 firms in this market, the short-run equilibrium price of copper would be $ would Therefore, in the long run, firms would False Supply (30 firms) ? Because you know that perfectly competitive firms earn be $ equilibrium. economic profit in the long run, you know the long-run equilibrium price must per kilogram. From the graph, you can see that this means there will be firms operating in the copper industry in long-run per kilogram. At that price, firms in this industry the copper market. True or False: Each of the firms operating in this industry in the long run earns positive accounting profit.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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8. Short-run and long-run effects of a shift in demand Suppose that the perfectly competitive tuna industry is in long-run equilibrium at a price of $3 per can of tuna and a quantity of 600 million cans per year. Suppose the Surgeon General issues a report saying that eating tuna is good for your health. The Surgeon General's report will cause consumers to demand tuna at every price. In the short run, firms will respond by Shift the supply curve, the demand curve, or both on the following diagram to illustrate these short-run effects of the Surgeon General's announcement. Note: Select and drag one or both of the curves to the desired position. Curves will snap into position, so if you try to move a curve and it snaps back to its original position, just drag it a little farther. PRICE (Dollars per can Supply 5 Demand 0 0 200 400 600 800 Demand 1000 1200 QUANTITY OF OUTPUT (Millions of cans) In the long run, some firms will respond by Supply until new technologies are discovered that…
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