Question : Consider a perfectly competitive market for steel. Assume that all
Consider a perfectly competitive market for steel. Assume that all firms in the industry are identical and have the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. Assume also that it does not matter how many firms are in the industry. Tool Tip: Place the mouse cursor over orange square points on the MC curve to see coordinates. The following diagram shows the market demand for steel. Use the orange points (square symbol) to plot the initial short-run industry supply curve when there are 20 firms in the market. Next, use the purple points (diamond symbol) to plot the short-run industry supply curve when there are 30 firms. Finally, points (cross symbol) to plot the short-run industry supply curve when there are 40 firms. With 40 firms in this market, the short run equiilbrium price of steel would be _______ per ton. At that price, firms in this industry would ________ Therefore, in the long run, firms would ________ the steel market. Because you know that perfectly competitive firms earn ________ economic economic profit in the long nun, you know the long-run equilibrium price must be ______ per ton. From the graph, you can see that this means there will be firms operating in the steel industry in long run equilibrium.