PRICE (Dollars per pound) ° 20 10 40 7. Short-run supply and long-run equilibrium Consider the competitive market for ruthenium. 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) 100 ATC 10 MCO AVC 0 15 20 30 35 40 45 50 QUANTITY (Thousands of pounds) The following graph plots the market demand curve for ruthenium. 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. Demand 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) Supply (20 firms) ... Supply (10 firms) Supply (30 firms) ? 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) 100 90 288 70 80 60 50 40 Demand 30 20 10 0 O 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) *1*1*1 Supply (10 firms) Supply (20 firms) A Supply (30 firms) If there were 10 firms in this market, the short-run equilibrium price of ruthenium would be $ per pound. At that price, firms in this industry would Therefore, in the long run, firms would Because you know that competitive firms earn the ruthenium market. economic profit in the long run, you per pound. From the graph, you can see firms operating in the ruthenium industry in long-run know the long-run equilibrium price must be $ that this means there will be 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. True False