Question: The daily demand for pizzas is Qd = 750 - 25P, where P is the price of a pizza. The daily costs for a pizza

The daily demand for pizzas is Qd = 750 - 25P, where P is the price of a pizza. The daily costs for a pizza company initially include $50 in fixed costs (which are avoidable in the long run but sunk in the short run), and variable costs equal to
VC = Q2/2, where Q is the number of pizzas produced in a day. Marginal cost is MC = Q. Suppose that in the long run there is free entry into the market. If fixed costs fall to $18, what is the new short-run market equilibrium? What is the new market equilibrium in the long run?

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The new market equilibrium in the short run is P 10 and Q 10 pizzas There are 50 firms in the short ... View full answer

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