### 7. Short-run supply and long-run equilibriumConsider 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.#### Graph Explanation:The graph provided illustrates three key cost curves for firms in the titanium industry:1. **Marginal Cost (MC):** - **Color:** Orange - The MC curve shows the change in total cost that arises when the quantity produced changes by one unit. The curve is U-shaped, indicating initially decreasing marginal costs due to economies of scale, followed by increasing marginal costs as diseconomies of scale set in.2. **Average Total Cost (ATC):** - **Color:** Green - The ATC curve represents the total cost per unit of output, calculated as total costs divided by the quantity of output. It incorporates both fixed and variable costs. The curve is also U-shaped, reflecting that average total costs decrease initially with increased production due to spreading fixed costs over more units, then increase as variable costs rise with higher output levels.3. **Average Variable Cost (AVC):** - **Color:** Purple - The AVC curve indicates the variable costs per unit of output, excluding fixed costs. Like the other curves, it is U-shaped, decreasing initially and then increasing as output rises.#### Notable Points:- **Axes:** - The horizontal axis represents the quantity of titanium produced (in thousands of pounds). - The vertical axis represents the costs (in dollars per pound).- **MC, ATC, and AVC Curves:** - The MC curve intersects the ATC and AVC curves at their minimum points, a typical feature of these curves due to the law of diminishing returns.**Educational Value:**Understanding these cost curves helps in analyzing firm behavior in competitive markets, particularly in determining pricing strategies, production levels, and profitability in both short-run and long-run scenarios. The following diagram shows the market demand for titanium.**Instructions:** - **Orange points (square symbol):** Plot the initial short-run industry supply curve when there are 10 firms in the market. - **Hint:** Disregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.- **Purple points (diamond symbol):** Plot the short-run industry supply curve when there are 20 firms.- **Green points (triangle symbol):** Plot the short-run industry supply curve when there are 30 firms.### Graph Details**Title:** Market Demand for Titanium **Axes:**- **Y-Axis:** Price (Dollars per pound) ranging from 0 to 80.- **X-Axis:** Quantity (Thousands of pounds) ranging from 0 to 1200.**Lines and Symbols:**- **Demand Curve:** A downward-sloping line representing the market demand.- **Supply (10 firms):** Orange squares are used for plotting the supply curve when there are 10 firms.- **Supply (20 firms):** Purple diamonds are used for plotting the supply curve when there are 20 firms.- **Supply (30 firms):** Green triangles are used for plotting the supply curve when there are 30 firms.### Explanation of the Supply and Demand Interaction1. **Given 20 firms in the market:** - The short-run equilibrium price of titanium is $ **[Blank]** per pound. - Firms in this industry would earn **[Blank]**. Therefore, in the long run, firms would **[Blank]** the titanium market.2. **Long-Run Equilibrium:** - Competitive firms earn **[Blank]** economic profit in the long run. - The long-run equilibrium price must be $ **[Blank]** per pound. - The graph indicates that this price results in **[Blank]** firms operating in the titanium industry in the long-run equilibrium.### True or False Question- **Statement:** Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns negative accounting profit. - **Options:** True / FalseUse this graph and instructions to better understand the market dynamics and equilibrium conditions in the titanium industry.

Supply Curve is the curve that denotes the different levels of quantity that a producer is willing…

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 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) plot the short-run industry supply curve when there are 30 firms. ? 80 72 Supply (10 firms) 64 56 48 Demand Supply (20 firms) 40 32 Supply (30 firms) 24 16 8 0 0 120 240 360 480 600 720 840 960 1080 1200 QUANTITY (Thousands of pounds) If there were 20 firms in this market, the short-run equilibrium price of titanium would be would per pound. At that price, firms in this industry the titanium market. Therefore, in the long run, firms would 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 negative accounting profit. True False PRICE (Dollars per pound)

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC