Unformatted text preview: b. The market price of pizza increases because the market equilibrium shifts up due to the 20 cent sales tax. c. Renato’s output is decreasing because it is a price taker and it has to remain at the same price while the marginal cost increases. So it must shift it’s profit maximization quantity down. d. Renato’s now is facing a loss as seen in the graph. 3. a. The total quantity of pizza sold in the long run will decrease because firms will leave the market because they are not making economic profit. b. The market price of pizza increases. c. Renato’s output stays the same it goes back to q1. d. The number of pizza parlors in the U.S. decreases....
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This homework help was uploaded on 04/07/2008 for the course PHI 101 taught by Professor Finberg during the Spring '08 term at Swarthmore.
- Spring '08