Question

Possible Answers

1: Earn zero profit, Earn positive profit, shut down, operate at a loss

2: Enter, Exit, Neither

3:Zero, Positive, Negative

4:10,15,20

Consider the perfectly 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 cost (AC), and average variable cost (AVC) curves shown on the following graph. 100 90 80 70 60 50 40 AC 30 20 AVC MC 10 0 0 10 20 30 40 50 60 70 80 100 QUANTITY (Thousands of pounds) COSTS (Dollars per pound) 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 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 Supply (10 firms) 80 70 Supply (15 firms) Supply (20 firms) Demand 30 20 10 0 0 123 250 373 500 623 750 873 1000 1123 1250 QUANTITY (Thousands of pounds) If there were 10 firms in this market, the short-run equilibrium price of copper would be per pound. At that price, firms in this industry would vTherefore, in the long run, firms would v the copper market. Because you know that the perfectly competitive firms earn economic profit in the long run, you know the long-run equilibrium price v firms operating in the copper industry in long-run must be S per pound. From the graph, you can see that this means there will be equilibrium True or False: Each of the firms operating in this industry in the long run earns negative accounting profit. True False PRICE (Dollars per p

Answer 1

Setting P=MC,the firm will produce only when the price is more than the minimum AVC so there is zero supply when the price =10.

Next,the supply schedule for 10,15 and 20 firms is as follows:-

Price	QS-1 FIRM	QS-10 FIRMS	QS-15 FIRMS	QS-20 FIRMS
10	0	0	0	0
15	30000	300000	450000	600000
30	40000	400000	600000	800000
40	45000	450000	675000	900000
70	55000	550000	825000	1100000
90	60000	600000	900000	1200000

100 90 Supply (10 firms) 80 70 Supply (15 firms) 60 50 40 Supply (20 firms) Demand 30 20 10 0 0 123 250 373 500 623 750 873 1000 1123 1250 QUANTITY (Thousands of pounds) PRICE (Dollars per pound)

When there are 10 firms, the price is 40 at which firms will earn positive economic profits so, in the long run, the firms will enter the market.

Because the firms earn zero economic profits in the long run, the long run price would be 30 at which there would be 15 firms in the market

The last statement is wrong.