Suppose the daily demand function for pizza in St. Catharines is Qd = 1525 5P. For one pizza store, the variable cost of making q pizzas per day is C(q) = 3q+0.01q^2 , there is a $100 fixed cost, and the marginal cost is MC = 3 + 0.02q. There is free entry in the long run.

(a) What is the long-run market equilibrium in this market? Assume in the short run, the number of firms is fixed (so that neither entry or exit is possible) and fixed costs are sunk. Also assume there is free entry in the long run.

(b) The market demand decreases to Qd = 1325 5P. Calculate the new short-run market equilibrium, the new long-run market equilibrium. (Characterize a market equilibrium by the equilibrium price, the equilibrium quantity, and the number of firms in the equilibrium.)