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. 100 8 20 0 00 2 COSTS Dollars per pound 50 40 ATC 30 20 10 Moc AVC 50 3 QUANTITY (Thousands of pounds) Homework (Ch 14) ols Use the orange points (square symbol to plot the intal short-run industry supply curve when there are 20 firms in the market. (Hint: You can disregard the portion of the supoly 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 supoly curve when there are 30 firms. Forally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 40 firms. 100 00 -0- 00 Supply (20 Supply (30) PRICE (Done per pound 30 Demand Sucely (hot 20 10 153203005 075 023 1350 QUANTITY (Thousands of pounds) If there were 30 firms in this market, the short cun 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 competitive firms car economic profit in the long run, you know the long run equilibrium price must be per pound. From the graph, you can see that this means there will be thems operating in the copper industry in long run equilibrium ere to search IT True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. True False