2. The market for a slice of pizza in Oakland is highly competitive. The market demand for a slice of pizza can be summarized by the function: D (p) = 1200-200p. Consider each pizza shop to be an individual firm with the same cost function C(q) = FC +1q², where FC represents fixed cost of renting a space from which to sell pizza, and the variable costs reflect the cost of the labor involved in producing and selling pizza. a. In the short-run (e.g. the six months following the signing of a lease for a space from which to sell pizza) determine the quantity each pizza shop would produce for any price in the market. b. In what way does your answer to part (a) depend on the fixed cost? Explain your answer in no more than two sentences. c. Suppose initially there are 100 pizza shops selling pizza in Oakland. Derive an expression for the short-run market supply for pizza. d. Find the short-run equilibrium price and quantity in the Oakland pizza market. How does this equilibrium depend on F? Note: these quantity numbers are not meant to seem realistic. e. Give an expression for an individual pizza firm's profits in the short run. Under what circumstances does each pizza shop earn positive, negative, or 0 profits. How do pizza shop profits depend on FC? Explain. f. Is there a nonzero price low enough that the firm should decide to shutdown in the short-run? In no more than three sentences, support your answer with evidence derived from your knowledge of this firm's costs.
2. The market for a slice of pizza in Oakland is highly competitive. The market demand for a slice of pizza can be summarized by the function: D (p) = 1200-200p. Consider each pizza shop to be an individual firm with the same cost function C(q) = FC +1q², where FC represents fixed cost of renting a space from which to sell pizza, and the variable costs reflect the cost of the labor involved in producing and selling pizza. a. In the short-run (e.g. the six months following the signing of a lease for a space from which to sell pizza) determine the quantity each pizza shop would produce for any price in the market. b. In what way does your answer to part (a) depend on the fixed cost? Explain your answer in no more than two sentences. c. Suppose initially there are 100 pizza shops selling pizza in Oakland. Derive an expression for the short-run market supply for pizza. d. Find the short-run equilibrium price and quantity in the Oakland pizza market. How does this equilibrium depend on F? Note: these quantity numbers are not meant to seem realistic. e. Give an expression for an individual pizza firm's profits in the short run. Under what circumstances does each pizza shop earn positive, negative, or 0 profits. How do pizza shop profits depend on FC? Explain. f. Is there a nonzero price low enough that the firm should decide to shutdown in the short-run? In no more than three sentences, support your answer with evidence derived from your knowledge of this firm's costs.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
d-f please!
![**Market Dynamics for Pizza Shops in Oakland**
The market for a slice of pizza in Oakland is highly competitive. The market demand is summarized by the function:
\[ D(p) = 1200 - 200p \]
Each pizza shop is considered an individual firm with the cost function:
\[ C(q) = FC + \frac{1}{2}q^2 \]
where \( FC \) represents the fixed cost of renting a space, and the variable costs pertain to labor costs in producing and selling pizza.
**Questions to Explore:**
a. **Short-Run Production Quantity**:
- Determine how much each pizza shop should produce in the short-run (e.g., the first six months after leasing a space) for any given market price.
b. **Dependency on Fixed Cost**:
- Explain how the quantity determined in part (a) is influenced by fixed costs in no more than two sentences.
c. **Market Supply with 100 Pizza Shops**:
- Assuming there are initially 100 pizza shops, derive the expression for short-run market supply.
d. **Short-Run Equilibrium**:
- Calculate the short-run equilibrium price and quantity in the Oakland pizza market.
- Discuss how this equilibrium is affected by \( F \).
- Note: The quantity numbers are illustrative and may not be realistic.
e. **Individual Firm's Short-Run Profits**:
- Provide an expression for the profits of an individual pizza firm in the short-run.
- Explain under what conditions a pizza shop earns positive, negative, or zero profits.
- Discuss how profits are influenced by \( FC \).
f. **Shutdown Decision**:
- Evaluate if there is a nonzero price low enough to warrant a firm's shutdown in the short-run.
- Support your explanation with evidence from the cost structure of the firm, summarized in no more than three sentences.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fad5f8718-b822-43a6-888a-6d9b997f8030%2F20a10ec0-d024-441d-892f-397b3fc3abe7%2Fq5yooz_processed.png&w=3840&q=75)
Transcribed Image Text:**Market Dynamics for Pizza Shops in Oakland**
The market for a slice of pizza in Oakland is highly competitive. The market demand is summarized by the function:
\[ D(p) = 1200 - 200p \]
Each pizza shop is considered an individual firm with the cost function:
\[ C(q) = FC + \frac{1}{2}q^2 \]
where \( FC \) represents the fixed cost of renting a space, and the variable costs pertain to labor costs in producing and selling pizza.
**Questions to Explore:**
a. **Short-Run Production Quantity**:
- Determine how much each pizza shop should produce in the short-run (e.g., the first six months after leasing a space) for any given market price.
b. **Dependency on Fixed Cost**:
- Explain how the quantity determined in part (a) is influenced by fixed costs in no more than two sentences.
c. **Market Supply with 100 Pizza Shops**:
- Assuming there are initially 100 pizza shops, derive the expression for short-run market supply.
d. **Short-Run Equilibrium**:
- Calculate the short-run equilibrium price and quantity in the Oakland pizza market.
- Discuss how this equilibrium is affected by \( F \).
- Note: The quantity numbers are illustrative and may not be realistic.
e. **Individual Firm's Short-Run Profits**:
- Provide an expression for the profits of an individual pizza firm in the short-run.
- Explain under what conditions a pizza shop earns positive, negative, or zero profits.
- Discuss how profits are influenced by \( FC \).
f. **Shutdown Decision**:
- Evaluate if there is a nonzero price low enough to warrant a firm's shutdown in the short-run.
- Support your explanation with evidence from the cost structure of the firm, summarized in no more than three sentences.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education