EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 8, Problem 5RQ
To determine
Clarify the statements proposed by each student as to which stands correct, in the given discussion.
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Initially, all firms in a perfectly competitive market are in long-run equilibrium. Assume that the market demand for the product produced by the firms
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7. Short-run supply and long-run equilibrium
Consider the competitive market for rhenium. 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
40
20
10 +
0
+
0
MC
+
5
ATC
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D
0
10 15 20 25 30 35
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40
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45
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?
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
ATC
COSTS (Dollars per pound)
N
72
64
56
40
32
24
16
8
0
0
4
■
AVC
MC
32
8 12 16 20 24 28
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Chapter 8 Solutions
EBK INTERMEDIATE MICROECONOMICS AND ITS
Ch. 8.3 - Prob. 1MQCh. 8.3 - Prob. 2MQCh. 8.3 - Prob. 1.1MQCh. 8.3 - Prob. 2.1MQCh. 8.4 - Prob. 1TTACh. 8.4 - Prob. 2TTACh. 8.4 - Prob. 1MQCh. 8.4 - Prob. 2MQCh. 8.5 - Prob. 1TTACh. 8.5 - Prob. 2TTA
Ch. 8.5 - Prob. 1.1TTACh. 8.5 - Prob. 2.1TTACh. 8.5 - Prob. 1MQCh. 8.5 - Prob. 2MQCh. 8 - Prob. 1RQCh. 8 - Prob. 2RQCh. 8 - Prob. 3RQCh. 8 - Prob. 4RQCh. 8 - Prob. 5RQCh. 8 - Prob. 6RQCh. 8 - Prob. 7RQCh. 8 - Prob. 8RQCh. 8 - Prob. 9RQCh. 8 - Prob. 10RQCh. 8 - Prob. 8.1PCh. 8 - Prob. 8.2PCh. 8 - Prob. 8.3PCh. 8 - Prob. 8.4PCh. 8 - Prob. 8.5PCh. 8 - Prob. 8.6PCh. 8 - Prob. 8.7PCh. 8 - Prob. 8.8PCh. 8 - Prob. 8.9PCh. 8 - Prob. 8.10P
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- 7. Short-run supply and long-run equilibrium Consider the perfectly competitive market for steel. 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 ton) 100 90 80 70 60 50 40 ATC 30 20 10 + MC AVC 0 0 5 10 15 20 25 30 35 40 45 50 QUANTITY OF OUTPUT (Thousands of tons) The following diagram shows the market demand for steel. ⑦? Use the orange points (square symbol) to plot the 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…arrow_forwardThe following graph illustrates the demand and marginal revenue curve (D=MR) of a perfectly competitive firm. Suppose that when the firm produces 70 units, its average variable cost equals $30 per unit and its average total cost equals $55 per unit. Use the green rectangle (triangle symbols) to plot the total cost of producing 70 units. Next, use the grey rectangle (star symbols) to plot the total variable cost of producing 70 units. Then, use the tan rectangle (dash symbols) to plot the total revenue at 70 units. Finally, use the purple rectangle (diamond symbols) to plot the profit or loss at 70 units. PRICE AND COST (Dollars) 100 90 80 70 60 50 40 30 20 10 0 O 10 20 30 40 50 60 QUANTITY (Units) +ATC + AVC 70 D=MR 80 90 100 Total Cost Total Variable Cost Total Revenue Profit or Loss ?arrow_forward6. Short-run supply and long-run equilibrium Consider the perfectly competitive market for steel. 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. (? 100 90 80 70 60 50 ATC 30 20 AVC 10 MC O 10 20 30 40 50 60 70 80 90 100 QUANTITY (Thousands of tons) COSTS (Dollars per ton) 8arrow_forward
- Consider the perfectly competitive market for dress shirts. The following graph shows the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves for a typical firm in the industry. PRICE AND COST PER UNIT (Dollars) 100 90 80 70 60 40 30 20 10 0 0 ☐ ☐ MC ■ ATC AVC 70, 85 ■ 10 20 30 40 50 60 70 80 90 QUANTITY OF OUTPUT (Thousands of shirts) 100 ?arrow_forwardThe following diagram shows the market demand for steel. 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) to plot the short-run industry supply curve when there are 30 firms. Supply (10 firms)Supply (20 firms)Supply (30 firms)01202403604806007208409601080120080726456484032241680PRICE (Dollars per ton)QUANTITY (Thousands of tons)Demand If there were 20 firms in this market, the short-run equilibrium price of steel would be per ton. At that price, firms in this industry would . Therefore, in the long run, firms would the steel market. Because you know that competitive…arrow_forwardIf there were 20 firms in this market, the short-run equilibrium price of rhodium would be per pound. At that price, firms in this industry would . Therefore, in the long run, firms would the rhodium 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 rhodium 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 Falsearrow_forward
- If there were 20 firms in this market, the short-run equilibrium price of ruthenium would be per pound. At that price, firms in this industry would . Therefore, in the long run, firms would the ruthenium 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 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 Falsearrow_forwardThe graph shows the marginal cost (MC), average total cost (ATC), and marginal revenue (MR) curves for a perfectly (or purely) competitive firm. Note, for such firms, the demand (D) curve is the same as the MR curve. Answer two questions, specifying to at least one decimal place. How many units should this firm produce to maximize profit? number of units: What price will the firm receive for each unit at the profit maximizing level out output? $ MC/MR $12 9.7 5.6 D=MR MC ATC 6.6 10.2 12 16 Quantityarrow_forwardThe following graph illustrates the demand and marginal revenue curve (D-MR) of a perfectly competitive firm. Suppose that when the firm produces 40 units, its average variable cost equals $65 per unit and its average total cost equals $80 per unit. Use the green rectangle (triangle symbols) to plot the total cost of producing 40 units. Next, use the grey rectangle (star symbols) to plot the total variable cost of producing 40 units. Then, use the tan rectangle (dash symbols) to plot the total revenue at 40 units. Finally, use the purple rectangle (diamond symbols) to plot the profit or loss at 40 units. PRICE AND COST (Dollars) 100 90 80 70 60 50 40 30 20 10 0 0 10 + 20 +ATC + AVC 30 40 50 60 QUANTITY (Units) 70 80 D=MR 90 H 100 Total Cost Total Variable Cost I Total Revenue Profit or Loss ?arrow_forward
- Peter's Pencils is a perfectly competitive company producing pencils. Suppose Peter is producing 1,000 pencils an hour. If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter A) makes an economic profit because marginal revenue is equal to marginal cost at this output level. B) should increase his output to increase his profit. C) is maximizing his profit and is making an economic profit. D) should decrease his output to increase his profit. E) is not maximizing his profit but is making zero economic profit anyway.arrow_forwardConsider the perfectly competitive market for steel. 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 ton) PRICE (Dollars per ton) 100 90 80 70 20 100 10 90 0 80 70 10 0 0 The following diagram shows the market demand for steel. MC 5 0 123 ATC 0 ♫ 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. AVC 0 10 15 20 25 30 35 QUANTITY…arrow_forwardCióń 6 óf 20 The graph shows the demand curve (D), average total cost curve (ATC), average variable cost curve (AVC), and the 90 marginal cost curve (MC) for a perfectly (or purely) competitive firm. 80 D = MR Assuming that this firm maximizes profit, what is this firm's 70 profit? 60 ATC 50 AVC ğ 40 - profit: $ 30 MC 10 0 10 20 30 40 50 60 70 80 90 Quantity Price and cost ($) 20arrow_forward
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