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Amy's Pizza operates in a competitive market. The machinery costs are $100 per day and this is the only fixed cost. Her variable costs consisting of bakers' wages, pizza ingredients and packaging supplies are shown below.
a. Suppose the market price per pizza is $21. How many pizzas should Amy sell to maximize profit and what will her total profit be?
b. Suppose the price per pizza falls to $17. How many pizzas will Amy now sell and what will be her profit or loss? Should she continue to operate or shut down in the short run?
c. Suppose the price per pizza falls all the way to $13. How many pizzas should Amy now sell?
d. What will be the long run market equilibrium price per pizza?
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