Chapter 8: Answers to Questions and Problems

Over time, other firms will innovate too, so in the long run Pizza Hut earns zero economic profits. Profit maximization requires equating MR and MC. Since . MR=P 1+E E =$1.50 1-2 -2 =$0.75 . and MC = $0.50, MR > MC. This means your firm can increase profits by reducing price in order to sell more pills. Notice that MR = 1,200 – 8Q, MC1 = 12Q ... ................
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