## Question 1 Suppose the market for pizzas in Hong Kong is a competitive market. The market demand schedule is shown below. Price per pizza Quantity Demanded (Market) \$100 1,000 \$110 800 \$120 600 \$130 400 \$140 200 Each pizza pro

Question 1
Suppose the market for pizzas in Hong Kong is a competitive market. The market
demand schedule is shown below.
Price per pizza Quantity Demanded (Market)
\$100 1,000
\$110 800
\$120 600
\$130 400
\$140 200
Each pizza producer will produce at a quantity that maximizes his/her profit. Each pizza
Quantity Marginal cost
1 pizza \$20
2 \$40
3 \$60
4 \$80
5 \$100
6 \$120
7 \$140
8 \$160
A. Calculate the total cost and average total cost of each pizza producer from 1 to 8 pizzas. Show your calculations. (30 marks)
B. Suppose the market price of a pizza is \$120.
i) How many pizzas will each producer produce? (10 marks)
ii) To satisfy the market demand, how many producers should be there? (10 marks)
iii) Calculate the profit of each pizza producer. (10 marks)
iv) Is the current market situation in the long-run equilibrium? Explain your answer. (10 marks)
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