The daily demand for pizzas is Qd = 720 - 30P where P is the price of a pizza. The daily costs for a pizza company initially include $50.00 in fixed costs (which are avoidable in the long run but sunk in the short run), and variable costs equal to where Q is the number of pizzas produced in a day. Marginal cost is
Suppose that in the long run there is free entry into the market. Assume fixed costs fall to $18 and, in the short run, the number of firms is fixed (so that neither entry nor exit is possible) and fixed costs are sunk.
Instructions: Round your answers to the nearest whole number.
a. What is the new market equilibrium in the short run?
Q* = pizzas.
P* = $.
There are firms in the short run.
b. What is the new market equilibrium in the long run?
Q* = pizzas.
P* = $.
There are firms in the long run.