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) 888888888 50 ATC AVC 10 MC ° 20 40 50 60 QUANTITY (Thousands of pounds) 90 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 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. 100 8888 PRICE (Dollars per pound) 20 10 Supply (15 firms) Supply (10 firms) ••• Supply (20 firms) Demand 30 0 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) If there were 10 firms in this market, the short-run equilibrium price of ruthenium would be $ would Therefore, in the long run, firms would per pound. At that price, firms in this industry the ruthenium market. Because you know that competitive firms earn $ equilibrium. 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 ruthenium industry in long-run 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
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) 888888888 50 ATC AVC 10 MC ° 20 40 50 60 QUANTITY (Thousands of pounds) 90 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 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. 100 8888 PRICE (Dollars per pound) 20 10 Supply (15 firms) Supply (10 firms) ••• Supply (20 firms) Demand 30 0 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) If there were 10 firms in this market, the short-run equilibrium price of ruthenium would be $ would Therefore, in the long run, firms would per pound. At that price, firms in this industry the ruthenium market. Because you know that competitive firms earn $ equilibrium. 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 ruthenium industry in long-run 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
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
Section: Chapter Questions
Problem 8PA
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![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
90
80
70
60
50
88 2 2 2 2 2 2
40
ATC
30
20
AVC
MC
°
°
10 20 30
50 60
70
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 15 firms. Finally, use the green points (triangle symbol) to
plot the short-run industry supply curve when there are 20 firms.
PRICE (Dollars per pound)
100
80
70
Supply (10 firms)
Supply (15 firms)
• • •]
40
Supply (20 firms)
Demand
30
10
0
125
250
750 875 1000 1125 1250
375 500
QUANTITY (Thousands of pounds)
If there were 10 firms in this market, the short-run equilibrium price of ruthenium would be $
Therefore, in the long run, firms would
would
Because you know that competitive firms earn
per pound. At that price, firms in this industry
the ruthenium market.
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 ruthenium 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](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F152d606a-19d5-42cc-b16b-d3ab7c31caac%2F69810dab-71e5-467f-b415-28221fb1e8be%2Foubp32j_processed.png&w=3840&q=75)
Transcribed Image Text: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
90
80
70
60
50
88 2 2 2 2 2 2
40
ATC
30
20
AVC
MC
°
°
10 20 30
50 60
70
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 15 firms. Finally, use the green points (triangle symbol) to
plot the short-run industry supply curve when there are 20 firms.
PRICE (Dollars per pound)
100
80
70
Supply (10 firms)
Supply (15 firms)
• • •]
40
Supply (20 firms)
Demand
30
10
0
125
250
750 875 1000 1125 1250
375 500
QUANTITY (Thousands of pounds)
If there were 10 firms in this market, the short-run equilibrium price of ruthenium would be $
Therefore, in the long run, firms would
would
Because you know that competitive firms earn
per pound. At that price, firms in this industry
the ruthenium market.
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 ruthenium 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
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