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Microeconomics

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Problem Set #5

Pizza restaurants are identical and exist in a market that is perfectly competitive. Marty's pizza parlor faces the following demand and costs...

a) Derive the profit-maximizing output quantity and the profits that are achieved.
b) Is the market in long-run equilibrium? If not, decribe what will happen in the market in the long run.
c) Now, suppose that the price of pizza increases to $15 dollars. Again, derive the profit-maximizing output quantity and the profits that are achieved.

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