The following diagram shows the market demand for titanium. Use the orange point

Question

The following diagram shows the market demand for titanium. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 20 firms in the market. (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 30 firms. Finally, use the green points (triangle symbol) to plot the short-run industry supply curve when there are 40 firms. If there were 20 firms in this market, the short-run equilibrium price of titanium would be per pound. At that price, firms in this industry would. Therefore, in the long run, firms would the titanium 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 titanium industry in long-run equilibrium. Each of the firms operating in this industry in the long run earns negative accounting profit.

Explanation / Answer

1) when 20 firms are there price = 40. at this price on MC curve P=MC=40 then supply=425, demand=425

at this price firms would make abnormal profit. so in LR other firms will enter.

competitive firms make zero profit. so in LR P=LAC= 30. at this price supplied quantity by one firm=20. market demand=600. so 30 firms.

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