Supply curve is the same as the marginal cost curve of the firm above the shutdown point.
P | Qs (1 firm) | Qs (20 firms) | Qs (40 firms) | Qs (60 firms) |
16 | 12 | 240 | 480 | 720 |
40 | 15 | 300 | 600 | 900 |
52 | 16 | 320 | 640 | 960 |
64 | 17 | 340 | 680 | 1020 |
80 | 18 | 360 | 720 | 1080 |
(All quantities are in thousands)
If there were 60 firms in this market, the short run equilibrium price of copper would be $ 40 per pound. At that price, firms in this industry would make a loss. Therefore, in the long run, firms would exit the copper market.
Because you know that competitive firms earn zero economic profit in the long run, you know that long run equilibrium price must be $ 52 per pound. From the graph, you can see that this means there will be 20 firms operating in the copper industry in long run equilibrium.
The statement is true (accounting profit = economic profit + implicit costs)
Consider the competitive market for copper. Assume that, regardless of how many firms are in the...
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) ATC MC D 0 5 45 50 10 15 20 25 30 35 40 QUANTITY (Thousands of pounds) Use the orange points (square symbol) to plot the initial short-run industry supply...
7. 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
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7. 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.
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 80 72 64 56 48 ATC 40 32 24 AVC 16 МС П 8 0 0 4 8 12 16 20 24 28 32 36 QUANTITY (Thousands of pounds) COSTS (Dollars per pound) 40 The...
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