Below are the costs for a pizza restaurant, the output is pizza, in units of (pizza).
$\begin{array}{ll}
\mathrm{P}_{\mathrm{Y}}=\$ 20 / \text { pizza } & \text { TFC }=\$ 10 \
\underline{\mathrm{Y} \text { (pizzas })} & \underline{\mathrm{TVC}(\$)} \
0 & 0 \
1 & 20 \
2 & 30 \
3 & 35 \
4 & 42 \
5 & 50 \
6 & 70 \
7 & 100
\end{array}$
-If the price of pizza is equal to $11/pizza, then the pizza restaurant should:

Question

Below are the costs for a pizza restaurant, the output is pizza, in units of (pizza).
 $\begin{array}{ll}
\mathrm{P}_{\mathrm{Y}}=\$ 20 / \text { pizza } & \text { TFC }=\$ 10 \
\underline{\mathrm{Y} \text { (pizzas })} & \underline{\mathrm{TVC}(\$)} \
0 & 0 \
1 & 20 \
2 & 30 \
3 & 35 \
4 & 42 \
5 & 50 \
6 & 70 \
7 & 100
\end{array}$
-If the price of pizza is equal to $11/pizza, then the pizza restaurant should:

Quizplus · Accepted Answer

To determine the profit-maximizing level of output, we need to find where Marginal Revenue (MR) equals Marginal Cost (MC). Since the price of pizza is $11/pizza, the MR is also $11.

To calculate the MC, we need to find the change in Total Variable Cost (TVC) divided by the change in output:

MC = ΔTVC / ΔQ

Using the table, we can calculate the change in TVC and change in output for each level of production:

ΔTVC = TVC (current output) - TVC (previous output)

ΔTVC / ΔQ = (current TVC - previous TVC) / (current output - previous output)

When Q=1, MC = (20 - 0)/(1-0) = $20/pizza
When Q=2, MC = (30 - 20)/(2-1) = $10/pizza
When Q=3, MC = (35 - 30)/(3-2) = $5/pizza
When Q=4, MC = (42 - 35)/(4-3) = $7/pizza
When Q=5, MC = (50 - 42)/(5-4) = $8/pizza
When Q=6, MC = (70 - 50)/(6-5) = $20/pizza
When Q=7, MC = (100 - 70)/(7-6) = $30/pizza

So the profit-maximizing level of output is where MC = MR = $11/pizza, which occurs at Q=5.

At Q=5, the Total Cost (TC) is calculated as:

TVC + TFC = $50 + $10 = $60

And the Total Revenue (TR) is calculated as:

Price x Q = $11/pizza x 5 = $55

So the profit is:

Profit = TR - TC = $55 - $60 = -$5

This means that the pizza restaurant is making a loss when producing 5 pizzas, but this is still better than the other options. If they produced fewer pizzas, their loss would be even greater. If they produced more pizzas, their MC would increase and they would make an even greater loss. Therefore, they should stay open and produce 5 pizzas.

Below Are the Costs for a Pizza Restaurant, the Output