Suppose that the market for pizzas in your town is perfectly (or purely) competitive, with a market price of $14 per pizza in longrun equilibrium. A local pizza restaurant, Pizzazzy, signs a one-year lease in a new building in town and continues selling pizzasat this price. People in your town view Pizzazzy pizzas as the same as other pizzas.Suppose that a couple of months after the new pizza restaurant opens, the local government institutes a $8 per pizza priceceiling. If you buy a $8 pizza from Pizzazzy a week later (and assuming Pizzazzy is behaving rationally), what do you knowabout the marginal cost, average total cost, and average variable cost at the profit maximizing point of production after the priceceiling is imposed?Answer Bankmarginal costno higher than $8no higher than $14 butdefinitely higher than $8average total costhigher than $14no higher than $14 butaverage variable costmaybe higher than $8

Given: The market price of pizza=$14 Price ceiling=$8 To find: Marginal cost, Average total cost,…

Suppose that the market for pizzas in your town is perfectly (or purely) competitive, with a market price of $14 per pizza in long run equilibrium, A local pizza restaurant, Pizzazzy, signs a one-year lease in a new building in town and continues selling pizzas at this price. People in your town view Pizzazzy pizzas as the same as other pizzas. Suppose that a couple of months after the new pizza restaurant opens, the local government institutes a $8 per pizza price ceiling. If you buy a S8 pizza from Pizzazzy a week later (and assuming Pizzazzy is behaving rationally), what do you know about the marginal cost, average total cost, and average variable cost at the profit maximizing point of production after the price ceiling is imposed? Answer Bank marginal cost no higher than $8 no higher than $14 but definitely higher than $8 average total cost higher than $14 no higher than $14 but maybe higher than S8 average variable cost

Suppose that the market for pizzas in your town is perfectly (or purely) competitive, with a market price of $14 per pizza in long run equilibrium, A local pizza restaurant, Pizzazzy, signs a one-year lease in a new building in town and continues selling pizzas at this price. People in your town view Pizzazzy pizzas as the same as other pizzas. Suppose that a couple of months after the new pizza restaurant opens, the local government institutes a $8 per pizza price ceiling. If you buy a S8 pizza from Pizzazzy a week later (and assuming Pizzazzy is behaving rationally), what do you know about the marginal cost, average total cost, and average variable cost at the profit maximizing point of production after the price ceiling is imposed? Answer Bank marginal cost no higher than $8 no higher than $14 but definitely higher than $8 average total cost higher than $14 no higher than $14 but maybe higher than S8 average variable cost

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter9: Price Takers And The Competitive Process

Section: Chapter Questions

Problem 16CQ

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