Question: Suppose the daily demand function for pizza in Berkeley is Qd = 3,500 - 100P. The variable cost of making Q pizzas per day is

Suppose the daily demand function for pizza in Berkeley is Qd = 3,500 - 100P.The variable cost of making Q pizzas per day is VC (Q) = 3Q + 0.01Q2 and there is a $100 fixed cost (which is avoidable in the long run).There is a free entry in the long run. What is the long-run market equilibrium in this market? Suppose that demand increases to Qd = 5,100 - 100P. If, in the short run, fixed costs are sunk, what is the new short-run market equilibrium? What is the new long-run market equilibrium if there is free entry in the long run? What if, instead, demand decreases to Qd = 1,900 - 100P.

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The longrun market equilibrium in this market is P 5 and Q 3000 pizzas Suppose that demand increases ... View full answer

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