Question

the market supply curve and exit and entry

Aplia Homework 6. The market supply curve and exit and entry Aa Aa Consider a perfectly competitive market for copper. Assume that all firms in the industry are identical and have the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. Assume also that it does not matter how many firms are in the industry. Tool Tip: Place the mouse cursor over orange square points on the MC curve to see coordinates. COST IDollars per poundl 10 MC 9 7 6 5 ATC 4 AVC 5 10 15 20 25 30 35 40 45 50 0 OUTPUT IThousands of pounds per dayl Perfect Competition : Aplia Homework 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, use the red points (cross symbol) to plot the short-run industry supply curve when there are 40 firms. PRICE (Dollars per pound 10 Supply (20 firms) 9 8 Supply (30 firms) 7 6 Supply (40 firms) 5 3 2 1 Demand 200 400 600 800 1000 1200 1400 1600 Clear All Help QUANTITY IThousands of pounds per day) With 30 firms in this market, the short-run equilibrium price of copper would be per pound. At that . Therefore, in the long run, firms would price, firms in this industry would the copper market. economic profit in the long run, you know per pound. From the graph, you can see that this means there Because you know that perfectly competitive firms earn the long-run equilibrium price must be firms operating in the copper industry in long-run equilibrium will be ONA 3.16 C 2004-2016 Aplia. All rights reserved. Graphs Tool 1.55 O 2002-2013 Cengage Learning. All rights reserved. © 2013 Cengage Learning except as noted. All rights reserved. Save&Continue Grade It Now Continue without saving

Answer 1

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