Bob runs a pedicure business in a perfectly competitive industry.He knows that he will break even if the price of pedicures is $15 but that he will have to shut down if the price is $11 or lower.If the market demand in the industry is P = 30 - (0.2)Q and the market supply is P = (0.2)Q,in the short run,Bob will:

Question

Quizplus · Accepted Answer

To find the equilibrium price, set the demand equal to the supply: 30 - 0.2Q = 0.2Q. Solving for Q gives Q = 75, and substituting Q = 75 into either the demand or supply equation gives P = $15. Since Bob breaks even at $15, he will produce but make zero economic profit.

Bob Runs a Pedicure Business in a Perfectly Competitive Industry