The 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 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. (?) 100 90 Supply (10 firms) 80 70 60 Supply (15 firms) 50 40 Supply (20 firms) Demand 30 20 10 123 250 373 500 623 750 873 1000 1123 1250 QUANTITY (Thousands of tons) If there were 10 firms in this market, the short-run equilibrium price of steel would be s . Therefore, in the long run, firms would per ton. At that price, firms in this industry would the steel market. Because you know that perfectly competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be S per ton. From the graph, you can see that this means there will be firms operating in the steel industry in long-run equilibrium. PRICE (Dollars per ton)

The 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 15 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 20 firms. (?) 100 90 Supply (10 firms) 80 70 60 Supply (15 firms) 50 40 Supply (20 firms) Demand 30 20 10 123 250 373 500 623 750 873 1000 1123 1250 QUANTITY (Thousands of tons) If there were 10 firms in this market, the short-run equilibrium price of steel would be s . Therefore, in the long run, firms would per ton. At that price, firms in this industry would the steel market. Because you know that perfectly competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be S per ton. From the graph, you can see that this means there will be firms operating in the steel industry in long-run equilibrium. PRICE (Dollars per ton)

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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