ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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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________ (operate at a loss/ shut down/ earn zero profit/ earn a positive profit). Therefore, in the long run, firms would ________ (enter/exit/ neither enter nor exit)  the titanium market.

Because you know that competitive firms earn ________ (zero/ negative/ positive) 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 ______ (10/ 15/ 20) firms operating in the titanium industry in long-run equilibrium.

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 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
90
80
70
60
50
40
30
20
10
Demand
0
0 125 250 375 500 625 750 875 1000 1125 1250
QUANTITY (Thousands of pounds)
Supply (10 firms)
Supply (15 firms)
Supply (20 firms)
?
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Transcribed Image Text: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 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 90 80 70 60 50 40 30 20 10 Demand 0 0 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) Supply (10 firms) Supply (15 firms) Supply (20 firms) ?
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.
COSTS (Dollars per pound)
100
90
80
70
60
50
40
30
20
10
0
0
MC
ATC
AVC
D
D
80
10 20 30 40 50 60 70
QUANTITY (Thousands of pounds)
90 100
?
expand button
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. COSTS (Dollars per pound) 100 90 80 70 60 50 40 30 20 10 0 0 MC ATC AVC D D 80 10 20 30 40 50 60 70 QUANTITY (Thousands of pounds) 90 100 ?
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