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Question
The market structure of the local pizza industry is best characterized by monopolistic competition. One Guy's Pizza is one of the producers in the local market. The demand for One Guy's Pizza is:Qd = 225 - 10P P = 22.5 - 0.1Qd.
The resulting marginal revenue curve is
MR(Qd) = 22.5 - 0.2Qd.
One Guy's cost function is:
C(Q) = 0.15Q2 MC(Q) = 0.3Q.
Determine One Guy's profit maximizing level of output and the price charged to customers. Is this a long-run equilibrium?
Answer
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