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. 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

In the short run, Bob will produce but just break even. At a price of $15, the market quantity demanded is Q = 100. The market quantity supplied is also Q = 100. Bob's total revenue is $1500, and his total cost is also $1500. Therefore, Bob will break even in the short run.

Bob Runs a Pedicure Business in a Perfectly Competitive Industry