If. Short-run supply and long-run equilibrium Consider the competitive market for rhenium. Assume that no matter howI many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATE), and average variable cost (AVG) curves plotted in the following graph. G) 100 90 80 E m C :5 8 _ so In 1 E E 5:: 6 a *' 4:: E o: ATC 0 so 0 2:: 10 MC AVG u 510 15 20 25 an 35 4o 45 so QUANTITY (Thou sands of pounds) The following graph plots the market demand curve for rhenium. 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 20 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 30 firms. 100 -0- 90 Supply (10 firms) 80 70 60 Supply (20 firms) 50 A PRICE (Dollars per pound) 40 Supply (30 firms) Demand 30 20 10 0 0 125 250 375 500 625 750 875 1000 1125 1250 QUANTITY (Thousands of pounds)If there were 10 firms in this market, the shortrun equilibrium price of rhenium would be per pound. At that price, rms in this industry would V . Thereforer in the long run, firms would V the rhenium market. Because you know that competitive firms earn V economic profit in the long run, you know the longrun equilibrium price must be per pound. From the graph, you can see that this means there will be V firms operating in the rhenium industry in longrun equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run eams negative accounting profit. 0 True 0 False If there were 10 firms in this market, the shortrun equilibrium price of rhenium would be per pound. At that price, rms in this industry would V . Therefore, in the long mn, firms would V the rhenium market. earn a posmve profit titive firms earn V economic profit in the long run, you Know the longrun equilibrium price must be e graph. you can see that this means there will be v rms operating in the rhenium industry in longrun equilibrium. shut down operate at a loss it costs are positive. each of the firms operating in this industry in the long run earns negative accounting profit. earn zero profit 0 False If there were 10 rms in this market, the shortrun equilibrium price of rhenium would be- per pound. At that price, rms in this industry would 7 . Therefore, in the long mn, firms would V the rhenium market. Because you know that competitive firms earn V economic pro' ow the longrun equilibrium price must be per pound. From the graph. you can see that this means there wi g in the rhenium industry in longrun equilibrium. neither enter l'lOl' exit True or False: Assuming implicit costs are positive. each of the firms operati long run earns negative accounting profit. O True O False If there were 10 firms in this market, the shortrun equilibrium price of rhenium would be per pound. At that price, rms in this industry would V . Therefore, in the long run, firms would V the rhenium market. Because you know that competitive firms earn 7 economic profit in the long run, you Know the longrun equilibrium price must be per pound. From the graph, you can is means there will be V rms operating in the rhenium industry in longrun equilibrium. True or False: Assuming implicit costs are posil negative the firms operating in this industry in the long run earns negative accounting profit. 0 Tme positive O False If there were 10 firms in this market. the shortrun equilibrium price of rhenium would be per pound. At that price, firms in this industry would 7 . Thereforer in the long run, firms would V the rhenium market. Because you know that competitive firms earn v economic profit in the long run. you know the longrun equilibrium price must be per pound. From the graphr you can see that this means there will be V rms operating in the rhenium industry in longrun equilibrium. True or False: Assuming implicit costs are positive, each of the firms operating in ustry in the long run eams negative accounting profit. O Tme 0 False