7. Short-run supply and long-run equilibriumConsider the competitive market for copper. 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. 7. Short-run supply and long-run equilibriumConsider the competitive market for copper. Assume that, regardliess of how many firms are in the industry, every firm in the industry is identical andfaces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the folowing graph.6456ATC402416AVCMOOE9 1215 11 21242730QUANTITY (Thousands of pounds)The following diagram shows the market demand for copper.Lise the orange points (square symbol) to plot the initial short-run industry supply curve when there are 20 firms in the market. (Hint: You candisregard the portion of the supply curve that carresponds to prices where there is no output since this is the industry supply curve.) Next, use thepurple paints (diamond symbal) to plot the short-run industry supply curve when there are 40 firms. Finaly, use the green points (triangle symbal) toplot the short-run industry supply curve when there are 60 firms.72Supply (20 firms)56DemandSupply (40 firms)4012Supply (60 firms)2416120240360 48072040 990QUANTITY (Thousands of pounds)(punod Jad sIog) SISOa(punod jad smon) an4 If there were 60 firms in this market, the short-run equilibrium price of copper would beper pound. At that price, firms in this industry- Therefore, in the long run, firms wouldthe copper market.pinomBecause you know that competitive firms eameconomic profit in the long run, you know the long-run equilibrium price must beper pound. From the graph, you can see that this means there will be- firms operating in the copper industry in long-runequilibrium.True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns negative accounting profit.O TrueO False

Competitive Market:When there are many producers competing to provide consumers with the goods and…

7. Short-run supply and long-run equilibrium Consider the competitive market for copper. 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.

7. Short-run supply and long-run equilibrium Consider the competitive market for copper. 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.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter9: Monopoly

Section: Chapter Questions

Problem 31P: Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as...

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7. Short-run supply and long-run equilibrium

Consider the competitive market for copper. 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.

If there were 60 firms in this market, the short-run equilibrium price of copper would be
per pound. At that price, firms in this industry
- Therefore, in the long run, firms would
the copper market.
pinom
Because you know that competitive firms eam
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 copper 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.
O True
O False

Definition Definition Total cost of producing a certain quantity of a good, divided by the quantity produced. It is the sum of all costs (fixed and variable) required to produce one unit of output.

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