7. Short-run supply and long-run equilibriumConsider the competitive market for rhodium. Assume that no matter how many firms operate in the industry, every firm is identical and faces thesame marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves plotted in the following graph.COSTS (Dollars per pound)10090807060504030202100MC0 5ATCAVC☐■10 15 20 25 30 35QUANTITY (Thousands of pounds)404550? The following graph plots the market demand curve for rhodium.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 candisregard the portion of the supply curve that corresponds to prices where there is no output since this is the industry supply curve.) Next, use thepurple points (diamond symbol) to plot the short-run industry supply curve when there are 20 firms. Finally, use the green points (triangle symbol) toplot the short-run industry supply curve when there are 30 firms.PRICE (Dollars per pound)10090807060504030201000125 250 375 500 625 750 875 1000 1125 1250QUANTITY (Thousands of pounds)OODemandBecause you know that competitive firms earn$OTrueSupply (10 firms)If there were 20 firms in this market, the short-run equilibrium price of rhodium would be $would. Therefore, in the long run, firms wouldFalseSupply (20 firms)Supply (30 firms)per pound. From the graph, you can see that this means there will be?True or False: Assuming implicit costs are positive, each of the firms operating in this industry in the long run earns positive accounting profit.per pound. At that price, firms in this industrythe rhodium market.economic profit in the long run, you know the long-run equilibrium price must befirms operating in the rhodium industry in long-run equilibrium.

Given, A competitive market for rhenium. The supply curve shows the range of quantities that a…

7. Short-run supply and long-run equilibrium Consider the competitive market for rhodium. 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. COSTS (Dollars per pound) 100 90 80 70 60 50 40 30 20 10 0 0 MC 5 ATC AVC ☐ ☐ ■ 10 15 20 25 30 35 QUANTITY (Thousands of pounds) 40 45 50 ?