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Question: 6 pts a local pizza shop has hired you as...

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(6 pts) A local pizza shop has hired you as a consultant to help it compete with national chains in the area. Because most business is handled by these national chains, the local shop operates as a price taker. Using historical data on costs, you find that short-run total costs each day are given by 4. STC- 10 + 2q + 0.1q, where q is daily pizza production. (1 pt) What is this pizza shops short-run supply curve? (1 pt) If the market price is $6.00, what is the pizza shops daily production quantity and profits? (2 pts) Suppose the pizza shop wants to know the lowest price such that it can break even (i.e., maintaining a net profit of zero). Please help the firm find this price. (2 pts) In the total cost function, $10 represents fixed costs that cant be changed in the short-run (e.g., rent of equipment), and 2q 0.1q2 represents variable costs (e.g., labor and raw materials). Currently, the market price of pizza is reduced from $6.00 to $3.00 because one major chain is having a sale. As a consultant, would you recommend the pizza shop to continue operations in the short run? Would your answer change if the price of pizza stays at $3.00 in the long run? a. b. c. d.

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