Suppose the daily demand function for pizza in Berkeley is Qd=1525-5P. The variable cost of making Q pizzas per day is C(Q)=3Q+0.01Q2 , there is a $100 fixed cost ( which is avoidable in the long run), and the marginal cost is MC= 3+0.02Q. There is free entry in the long run. What is the long run market equilibrium in this market?
Suppose that demand increases to Qd=2125-5P. 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=925-5P?