1 answer

5. Short-run supply and long-run equilibrium Consider the competitive market for copper. Assume that, regardless of...

Question:

5. Short-run supply and long-run equilibrium Consider the competitive market for copper. Assume that, regardless of how manyThe following diagram shows the market demand for copper Use the orange points (square symbol) to plot the initial short-runSupply (20 firms) Demand Supply (40 firms) PRICE (Dollars per pound) Supply (60 firms) 0 120 1080 1200 240 360 480 600 720 84

5. 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. COSTS (Dollars per pound) AVC MC O 0 3 27 30 6 9 12 15 18 21 24 QUANTITY (Thousands of pounds)
The following diagram shows the market demand for copper 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 40 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 60 firms. Supply (20 fims) Demand Supply (40 firms) PRICE (Dollars per pound) Supply (60 firms) 0 120 1080 1200 240 360 480 600 720 840 960 QUANTITY (Thousands of pounds)
Supply (20 firms) Demand Supply (40 firms) PRICE (Dollars per pound) Supply (60 firms) 0 120 1080 1200 240 360 480 600 720 840 960 QUANTITY (Thousands of pounds) If there were 60 firms in this market, the short-run equilibrium price of copper would be $ . Therefore, in the long run, firms would per pound. At that price, firms in this industry would the copper 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 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. True False

Answers

Price QS by 20 firms QS by 40 firms QS by 60 firms
20 40 60
16 240000 480000 720000
40 300000 600000 900000
52 320000 640000 960000
64 340000 680000 1020000
80 360000 720000 1080000

Supply (20 firms) Den and Supply (40 firms) PRICE (Dollars per pound) Supply (60 firms) 0 120 1080 1200 240 360 480 600 720 8

Blank 1: 40

Blank 2: make economic loss

Blank 3: Exit

Blank 4: Zero

Blank 5: 52

Blank 6: 20

Given statement is False

.

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