Problem
Suppose the daily demand function for pizza in Berkeley is Qd = 1,525 - 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 = 2,125 - 5P. If, in the short run, the number of firms is fixed (so that neither entry nor exit is possible) and fixed costs are sunk, what is the new shortrun market equilibrium? What is the new long-run market equilibrium if there is free entry in the long run? What if instead demand decreased to Qd = 925 - 5P?
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.