Question: Louie started a pizza shop called Laker Pizza. The pizza shop is in a perfectly competitive market that has an equilibrium price of $10.00
Variable Cost is based on number of employees hired. Each employee cost $50
Complete the table and answer the questions below.
Employees Output Total Cost Variable Cost
0 0 $50.00
What is the profit-maximizing output?
Is the pizza shop showing an economic profit or an economic loss?
What is the total profit/loss at the profit-maximizing output?
What is the minimum price Louie can accept before he shuts down?
Assume competitive pressure pushes prices down to $6.25, would you advise Louie to shut-down in the short-run?
Would you advise Louie to exit the market in the long-run?
Create a graph in Excel that shows all three cost curves and marginal revenue. Edit
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