Question

Answer b-e

Output Total cost(dollars per (pizzas per hour) hour) 10 21 Pat's Pizza Kitchen is a price taker in a perfectly competitive market. Its costs are in the table. a. Calculate Pat's profit-maximizing output and economic profit if the market price is (i) $14 a pizza. (ii) $12 a pizza. (iii) $10 a pizza b. What is Pat's shutdown point and what is Pat's economic profit if it shuts down temporarily? c. Derive Pat's supply curve. d. At what price will firms with costs identical to Pat's exit the pizza market in the long run? e. At what price will firms with costs identical to Pat's enter the pizza market in the long run?

Answer 1

Q	TC	MC	VC	AVC	ATC
0	10	10	0
1	21	11	11	11	21
2	30	9	20	10	15
3	41	11	31	10.33333	13.66667
4	54	13	44	11	13.5
5	69	15	59	11.8	13.8

b) The shutdown point is the Minimum AVC = 10

If it shuts down temporarily it will incur a total loss of 10

c) The firm will only produce when the Price is equal to or above its minimum AVC so the portion of the MC curve which starts from and lies above the minimum AVC is the supply curve.

d) The firms exit the market when the Price is less than Minimum ATC = 13.5

e) The firms enther the market when the Price is greater than Minimum ATC = 13.5