Homework Help is Here – Start Your Trial Now!
Business
Economics
Consider the competitive market for rhenium. 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.

Consider the competitive market for rhenium. 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.

Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter13: Firms In Competitive Markets
Section: Chapter Questions
Problem 7PA
See similar textbooks
icon
Related questions
Question
7. Short-run supply and long-run equilibrium Consider the competitive market for rhenium. 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 70 60 40 20 10 + 0 + 0 MC + 5 ATC AVC D 0 10 15 20 25 30 35 QUANTITY (Thousands of pounds) 40 + 45 50 ?
Transcribed Image Text:7. Short-run supply and long-run equilibrium Consider the competitive market for rhenium. 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 70 60 40 20 10 + 0 + 0 MC + 5 ATC AVC D 0 10 15 20 25 30 35 QUANTITY (Thousands of pounds) 40 + 45 50 ?
The following graph plots the market demand curve for rhenium. 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 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. PRICE (Dollars per pound) 100 90 80 70 60 50 40 30 20 10 0 0 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) Demand Because you know that competitive firms earn $ Supply (10 firms) If there were 20 firms in this market, the short-run equilibrium price of rhenium would be S would Therefore, in the long run, firms would True Supply (20 firms) False Supply (30 firms) per pound. From the graph, you can see that this means there will be per pound. At that price, firms in this industry the rhenium market. economic profit in the long run, you know the long-run equilibrium price must be firms operating in the rhenium 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.
Transcribed Image Text:The following graph plots the market demand curve for rhenium. 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 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. PRICE (Dollars per pound) 100 90 80 70 60 50 40 30 20 10 0 0 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds) Demand Because you know that competitive firms earn $ Supply (10 firms) If there were 20 firms in this market, the short-run equilibrium price of rhenium would be S would Therefore, in the long run, firms would True Supply (20 firms) False Supply (30 firms) per pound. From the graph, you can see that this means there will be per pound. At that price, firms in this industry the rhenium market. economic profit in the long run, you know the long-run equilibrium price must be firms operating in the rhenium 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.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 3 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Perfectly Competitive Market
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Recommended textbooks for you
Essentials of Economics (MindTap Course List)
Essentials of Economics (MindTap Course List)
Economics
ISBN:
9781337091992
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou…
Principles of Economics, 7th Edition (MindTap Cou…
Economics
ISBN:
9781285165875
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Principles of Economics 2e
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
SEE MORE TEXTBOOKS