Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 s 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 + 125 250 375 so0 625 750 875 1000 1125 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 competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be ]per ton. From the graph, you can see that this means there will be firms operating in the steel 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 positive accounting profit. O True False PRICE (Dollars per ton)
Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 10 s 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 + 125 250 375 so0 625 750 875 1000 1125 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 competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be ]per ton. From the graph, you can see that this means there will be firms operating in the steel 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 positive accounting profit. O True False PRICE (Dollars per ton)
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter21: Production And Costs
Section: Chapter Questions
Problem 16QP
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Question
Transcribed Image Text:Consider the 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
40
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)
Transcribed Image Text: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
125
250
375
500
625
750
875 1000 1125 1250
QUANTITY (Thousands of tons)
If there were 10 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 firms earn
economic profit in the long run, you know the long-run equilibrium price must be
per ton. From the graph, you can see that this means there will be
firms operating in the steel 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 eams positive accounting profit.
O True
O False
PRICE (Dollars per ton)
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