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. The following diagram shows the market demand for titanium. 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. If there were 20 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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.

The following diagram shows the market demand for titanium.

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.

If there were 20 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.

100
90
80
O 70
60
50
40
ATC
30
20
AVC
10
MC O
5
10
15
20
25
30
35
40
45
50
QUANTITY (Thousands of pounds)
The following diagram shows the market demand for titanium.
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)
PRICE (Dollars per pound)
COSTS (Dollars per pound)

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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