Cost-Demand Conditions: Profit Maximizing Quantity
Suppose your boss buys out every single pizza store in the
US. Your cost-demand conditions are as follows: profit maximizing quantity – 60
pizzas; price – 20$ per piece; per unit cost (total) – $12 per piece, per unit
cost (variable) – $8.
a. Draw the
graph, label all the curves and put all the numbers on the graph. Identify the
market structure.
Your boss wants to know the answers to the following
questions:
b. How much
revenue is XYZ making? What are the costs? What is the profit?
Will the company stay open in the short run? Provide
intuition for your answer.
c. Show on
the graph and explain what will happen in the pizza market in the long run.
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