(Solved): 7. Short-run supply and long-run equilibrium Consider the competitive market for ruthenlum. Assume ...

7. Short-run supply and long-run equilibrium Consider the competitive market for ruthenlum. Assume that no matter how many firms operate in the industry, every firm is identical and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AvC) curves plotted in the following graph. The following graph plots the market demand curve for ruthenium. Use the orange points (square symbol) to plot the inital 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 supaly curve.) Next, use the purplo points (dlamond symbol) to plot the short-runi industry supply curve when there are 15 firms. Finally, use the green points (triangie symbol) to plot the short-run industry suppy curve when there are 20 firms. If there were 10 firms in as market, the short-run equilibrium price of ruthenium would be per pound. At that orice, firms in this industry would Therefore, in the long run, firms would the ruthenium market. Because you know that competilive firms earm econoric proft in the long run, you know the long-run equmbeium arice must be per pound. From the graph, vou can see that this tseans there nill be firms operating in the ruthenium industry in long. run equilibrivim. True on False: Assuming implicit costs are positive, each of the firms operating in this industry ln the long ruf eams negative accounting profit True False 7. Short-run supply and long-run equilibrium Consider the competitive market for ruthenium. Assume that no matter how many firms operate in the industry, every firm is identicat and faces the same marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph. COSTS (Dollars per pound) The following graph plots the market demand curve for ruthenium. 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 pncos whore there is no outpeut since this is the industry supaly curce. Next, ose the purple points (diamond symbol) to plot the short-run industry supply curve when there are 15 firms, Finally, use the groen pounts (trangle symbol) to plot the short run industry supply curve when there are 20 firms. (?) Supply (10 firms) Supply (15 firms) Supply (20 firms) If there were 10 firms in this market, the short-run equilibrium price of ruthenium would be per pound. At that price, firms in this industry would Therefore, in the long run, firms would the ruthenium market. Because you know that competitive firms earn 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 firms operating in the ruthenium 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 eams negative accounting profit. True False