The following diagram shows the market demand for copper. Use the orange points
ID: 1097632 • Letter: T
Question
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. (Note: Ignore the portion of the supply curve that corresponds to prices at which 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 30 firms. finally, USC the red points (cross symbol) to plot the short -run industry supply curve when there are 40 firms. With 30 firms In this market, the short -run equilibrium price of copper would be per pound. At that price, firms In this Industry would . Therefore, in the long run, firms would the copper market. Because you know that perfectly competitive firms earn economic profit in the long run, you know Ole long run equilibrium price must be per pound From the graph, you can see that this means there WI be firms operating in the copper Industry in long -run equilibrium.Explanation / Answer
The supply schedules of firms would be:
The demand ends at 900 quantity and starts at 500 quantity.
The demand equals supply at 750 with price=$4 when there are 30 firms.
Each firm produces 750/30= 25.
With 30 firm price would $4. At that price firm sin the industry would produce 25/each. In the ong run firms would enterthe copper market.
Perfect competition has zero economic profits. Long run price wouls be $2.5 (min. ATC=2.5). There will 40 firms in the long run.
This is because the price and marginal cost is 2.5 at 800 (40*20) quantity when there are 40 firms. Min ATC is the long run condition.
Supply for one firm 30 firms 40 Firms Marginal cost 5 150 200 10 300 400 1 15 450 600 1.5 20 600 800 2.5 25 750 1000 4 30 900 1200 6 35 1050 1400 9 40 1200 1600 45 1350 1800 50 1500 2000Related Questions
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