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 &&&2 2 2 2 2 2 2 ATC 20, 10 20 AVC + MC 0 ° 10 20 30 40 60 60 70 80 QUANTITY (Thousands of pounds) 00 100 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 50 Supply (10 firms) Supply (15 firms) 40 Supply (20 firms) Demand 30 20 10 о о 125 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) If there were 10 firms in this market, the short-run equilibrium price of ruthenium would be S would Therefore, in the long run, firms would, Because you know that competitive firms earn equilibrium. 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 True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns negative accounting profit.
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 &&&2 2 2 2 2 2 2 ATC 20, 10 20 AVC + MC 0 ° 10 20 30 40 60 60 70 80 QUANTITY (Thousands of pounds) 00 100 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 50 Supply (10 firms) Supply (15 firms) 40 Supply (20 firms) Demand 30 20 10 о о 125 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) If there were 10 firms in this market, the short-run equilibrium price of ruthenium would be S would Therefore, in the long run, firms would, Because you know that competitive firms earn equilibrium. 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 True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns negative accounting profit.
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: Firms In Competitive Markets
Section: Chapter Questions
Problem 4PA
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Transcribed Image Text: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
20, 10
20
ATC
AVC
10
MC
0
0
10
20
40
50 80 70 80
00
100
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 (Dolars per pound)
100
90
80
70
Supply (10 firms)
Supply (15 firms)
40
Supply (20 firms)
Demand
20
10
0
0
125
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 $
. 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.
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