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 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 30 firms. Finally, use the green points (triangle symbol) to plot the short- run industry supply curve when there are 40 firms. 100 90 Supply (20 firms) 80 70 60 Supply (30 firms) 50 40 Supply (40 firms) Demand 30 20 10 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) If there were 30 firms in this market, the short-run equilibrium price of copper would be s per pound. At that price, firms in this industry would Therefore, in the long run, firms would v 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. True False PRICE (Dollars per pound)
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 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 30 firms. Finally, use the green points (triangle symbol) to plot the short- run industry supply curve when there are 40 firms. 100 90 Supply (20 firms) 80 70 60 Supply (30 firms) 50 40 Supply (40 firms) Demand 30 20 10 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) If there were 30 firms in this market, the short-run equilibrium price of copper would be s per pound. At that price, firms in this industry would Therefore, in the long run, firms would v 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. True False PRICE (Dollars per pound)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Please try to answer this by tonight, and please show the table with exact plot points for each!
Transcribed Image Text:7. Short-run supply and long-run equilibrium
Consider the competitive market for copper. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and
faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph.
100
90
80
70
50
40
ATC
30
AVC
10
MC O
0.
0 5
10
15
20
25
30
35
45
50
QUANTITY (Thousands of pounds)
The following diagram shows the market demand for copper.
40
20
COSTS (Dollars per pound)
Transcribed Image Text: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 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 30 firms. Finally, use the green points (triangle symbol) to plot the short-
run industry supply curve when there are 40 firms.
100
90
Supply (20 firms)
80
70
60
Supply (30 firms)
50
40
Supply (40 firms)
Demand
30
20
0.
0.
125
250
375
500
625
750
875
1000 1125
1250
QUANTITY (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 industry would
Therefore, in the long run, firms 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.
True
False
PRICE (Dollars per pound)
10
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