Question

The table nearby represents the hourly output and cost structure for a local pizza shop. The market is perfectly competitive, and the market price of a pizza in the area is $\$10$. Total costs include all opportunity costs. Fixed costs equal zero.

a. Calculate the total revenue and total economic profit for this pizza shop at each rate of output.

b. Assuming that the pizza shop always produces and sells at least one pizza per hour, does this appear to be a situation of short-run or long-run equilibrium?

c. Calculate the pizza shop's marginal cost and marginal revenue at each rate of output. Based on marginal analysis, what is the profit maximizing rate of output for the pizza shop?

d. Draw a diagram depicting the short-run marginal revenue and marginal cost curves for this pizza shop, and illustrate the determination of its profit-maximizing output rate.

Short answer

a. Total revenue increases because the output increases. The income of a pizza place improves because its output per hour grows.
b. Astore produce and sales one the Pizza per hour is brief run equilibrium.
c. That they're marginal cost and marginal revenue
d. Marginal revenue is adequate average revenue. price cuts marginal revenue from below.

Step-by-step solution

Introduction

The complete unit price ratiois just an aggregate of all regular bills incurred by a business. Monitoring variousstyles of expenditures as activity volumes fluctuate will help identify these costs.a collection cost onewhich does not changedue to the degree of activity. Some assets are categorized are mixed costs but they include both fixed costs parts.

Given Information (a)

(a) The market is perfectly competitive,and therefore the market value of a pizzawithin the area is $\$10$. Total costs include all opportunity costs. Fixed costs equal zero.the overall revenue and total economic profit for thispizzeria at each rate of output.

Explanation (a)

(a) Total revenue (TR) is up to cost into quantity $(TR=P\times Q)$. Total economic profit is upto total revenue minus total cost $\text{( Profit=TR-TC)}$

Total revenue and total economic profit is calculated withinthe subsequent tabular presentation of output and total cost of Pizza. within the above tabular presentation of output and total cost of Pizza, two columns added,which they're total revenue and economic profit. Total revenue increases because the output increases. Pizza shop's profit increases as their output per hour increases.

Given Information (b)

(b) The market is perfectly competitive,and also the value of a pizzawithin the area is . Total costs include all opportunity costs. Fixed costs equal zero. Thestore always produces and sellsa minimum of one pizza per hour, does this appear to be a situation of short-run or long-run equilibrium.

Explanation (b)

(b) If the shop produces and sales a minimum of$1$ Pizza per hour, it is a situation of short run equilibrium. In future equilibrium, MR=MC and so the short run price is adequate future cost. The firm earns normal profit infuture.
Thus,a store produce and sales one the Pizza per hour is brief run equilibrium.

Given Information (c)

(c) The market is perfectly competitive,and also the market value of a pizzawithin the area is . Total costs include all opportunity costs. Fixed costs equal zero. The profit maximizing rate of output for thestore

Explanation (c)

(c) Cost and marginal revenue is calculated within the subsequent tabular presentation of output and total cost of Pizza. within the above tabular presentation of output and total cost of Pizza, two columns added, which they're incremental cost and marginal revenue. Marginal revenue is constant for store.

Given Information (d)

(d) The market is perfectly competitive,and therefore the value of a pizzawithin the area is . Total costs include all opportunity costs. Fixed costs equal zero. The short-run marginal revenue andincremental cost curves for thispizza parlor.

Explanation (d)

(d) To draw the diagram presenting the short-run marginal revenue and differential cost curve for the shop,it's a necessity to calculate average total cost (ATC).

ATC isup to the general cost divided by the output ($ATC=TC/Q$). it's inserted withinthe subsequent table:

In the above diagram, output and sales of pizzas had taken on $x$-axis and price of pizzas in dollar had taken on $y$-axis. within the above diagram, marginal revenue is adequate average revenue. price cuts marginal revenue from below. Shaded area indicates the profit of the firm.