Consider again Worked-Out Problem 14.2. The daily demand for pizza is Qd = 32,900 - 600P, where P is the price of pizza. The daily costs for a pizza company include $845 in avoidable fixed costs and variable costs equal to VC = 5Q + Q2 /80, where Q is the number of pizzas produced each day. Marginal cost when producing Q pizzas is MC = 5 + Q / 40. Recall that the price is $11.50, and the total quantity demanded is 26,000 pizzas per day. In a long-run equilibrium, each active firm produces 260 pizzas per day, its efficient scale. That means there are 100 active firms in the initial long-run equilibrium.
Suppose that starting at the initial long-run equilibrium with a price of $11.50 and 100 active firms, the government requires firms to pay a tax of $11.50 per pizza. What is the amount paid by buyers and received by sellers in the short run? What is the government revenue? What is the deadweight loss? What about in the long run?