Question

Consider the information provided in Problem $23-4$. Suppose the market price drops to only $\$5$ per pizza. In the short run, should this pizza shop continue to make pizzas, or will it maximize its economic profits (that is, minimize its economic loss) by shutting down?

Short answer

The pizza should still produce pizzas although the value declines to $\$5$.

Step-by-step solution

introduction 

The market value is that the current price at which an asset or service is bought or sold. The factors of supply side obtain the cost about a commodity or product the value is the estimated about which quantity supply balances quantities required.
The value is employed to calculate consumer and economic surplus.

Given Information

The valuation have dropped only to one sandwich. Within the short run, should this store still make pizzas, or will it maximize its economic profits.

Explanation

If the market value falls to $\$5$, the pizza parlor should still produce pizza since it's able to cover its a dynamic number. The hourly unit benefit for pepperoni stays consistent. Like a result, the contribution margin for sandwich will be$\$5$. The estimate provides the average overheads of either a sandwich.

Thus, the pizzeria should still produce pizzas although the value declines to $\$5$.