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 40 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 60 firms. 80 72 Supply (20 firms) 64 56 Demand 48 Supply (40 firms) 40 32 Supply (60 firms) 16 8 120 240 360 480 600 720 840 960 1080 1200 QUANTITY (Thousands of pounds) If there were 60 firms in this market, the short-run equilibrium price of titanium would be $ per pound. At that price, firms in this industry would Therefore, in the long run, firms would v the titanium 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 titanium 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. O True O 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 40 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 60 firms. 80 72 Supply (20 firms) 64 56 Demand 48 Supply (40 firms) 40 32 Supply (60 firms) 16 8 120 240 360 480 600 720 840 960 1080 1200 QUANTITY (Thousands of pounds) If there were 60 firms in this market, the short-run equilibrium price of titanium would be $ per pound. At that price, firms in this industry would Therefore, in the long run, firms would v the titanium 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 titanium 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. O True O False PRICE (Dollars per pound)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 40 firms. Finally, use the green points (triangle symbol) to
plot the short-run industry supply curve when there are 60 firms.
80
72
Supply (20 firms)
64
56
Demand
48
Supply (40 firms)
40
32
Supply (60 firms)
24
16
8
120
240
360
480
600
720
840
960
1080 1200
QUANTITY (Thousands of pounds)
If there were 60 firms in this market, the short-run equilibrium price of titanium would be $
per pound. At that price, firms in this industry
would
Therefore, in the long run, firms would
the titanium 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 titanium 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.
True
O False
PRICE (Dollars per pound)
Transcribed Image Text:7. Short-run supply and long-run equilibrium
Consider the competitive market for titanium. 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.
80
72
64
56
АТС
48
40
32
24
16
AVC
8
MC O
3
6
9
12
15
18
21
24
27
30
QUANTITY (Thousands of pounds)
The following diagram shows the market demand for titanium.
COSTS (Dollars per pound)
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