Short-run and long-run equilibrium for a perfectly competitive firm
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 total cost (ATC), and average variable cost (AVC) curves shown on the following graph.
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 total cost ( ATC), and average variable cost (AVC) curves shown on the following graph. 80 72 84 58 ATC 0 48 COSTS (Dollars per kilogram) 40 32 24 18 AVC 8 MC O 0 0 3 9 12 15 18 21 24 27 30 QUANTITY OF OUTPUT (Thousands of kilograms)The following diagram shows the market demand for copper. Use the orange points (square symbol) to plot the 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. 80 72 Supply (20 firms) 64 Demand 48 Supply (40 firms) 40 A PRICE (Dollars per kilogram) 32 Supply (60 firms) 24 0 0 120 240 380 480 800 720 840 980 1080 1200 QUANTITY OF OUTPUT (Thousands of kilograms)If there were 20 firms in this market, the short-run equilibrium price of copper would be $ per kilogram. At that price, firms in this industry would . Therefore, in the long run, firms would the copper market. Because you know that perfectly competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be $ per kilogram. From the graph, you can see that this means there will be firms operating in the copper industry in long-run equilibrium. True or False: Each of the firms operating in this industry in the long run earns negative accounting profit. O True O FalseIf there were 20 firms in this market, the short-run equilibrium price of copper would be per kilogram. At that price, firms in this industry would . Therefore, in the long run, firms would the copper market. Because you know that perfectly competitive firms earn enter eco un, you know the long-run equilibrium price must be $ per kilogram. From the graph, you can see that this me exit firms operating in the copper industry in long-run equilibrium. neither enter nor exit True or False: Each of the firms operating in this industry in the long run earns negative accounting profit. O True FalseBecause you know that perfectly competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be $ per kilogram. From the graph, you can is means there will be firms operating in the copper industry in long-run equilibrium. negative zero True or False: Each of the firms operating in this industry run earns negative accounting profit. positive O True O FalseBecause you know that perfectly competitive firms earn economic profit in the long run, you know the long-run equilibrium price must be $ per kilogram. From the graph, you can see that this means there will be firms operating in the copper industry in long-run equilibrium. 20 True or False: Each of the firms operating in this industry in the long run earns negative act 40 g profit. O True 60
