Homework (Ch 14) Back to Assignment Attempts Keep the Highest / 4 7. Short-run supply and long-run equilibrium Consider the competitive market for steel. 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 ATC COSTS (Dollars per ton) AVC MC O 3 9 12 15 18 21 24 27 30 QUANTITY (Thousands of tons) The following diagram shows the market demand for steel. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 20 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 40 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 60 firms.(? BO -0- 72 Supply (20 firms) 64 Demand Supply (40 firms) 40 LA PRICE (Dollars per ton) Supply (60 firms) 24 16 120 240 360 480 600 720 840 960 1080 1200 QUANTITY (Thousands of tons) If there were 60 firms in this market, the short-run equilibrium price of steel would be |$ per ton. At that price, firms in this industry would . Therefore, in the long run, firms would the steel market. Because you know that competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be S per ton. From the graph, you can see that this means there will be * firms operating in the steel industry in long-run equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit. O True O False Grade It Now Save & Continue Continue without saving