Marginal Pizza is a famous pizzeria in town, which is a competitive market. Below are a series of "changes" in the market for pizza where Marginal Pizza operates. For each of the changes, please provide the following two things:
WHAT happens to the price of pizza?
EXPLANATION for the change (if any), in the price of pizza
Make sure to refer to fixed costs, variable costs, and/or marginal costs in your answer.
a) The price of cheese goes up.
b) A new restaurant tax of 50¢ per slice of pizza is imposed.
c) Marginal Pizza is discovered to be in violation of a safety code, and the violation is one that would be prohibitively expensive to correct. As a result, Marginal is certain to incur a fine of $500 per year from now on (assume Marginal Pizza will not go out of business as a result of paying the fine).
d) A new restaurant tax of $500 per year is imposed.
e) Marginal Pizza recalculates and realizes that the redecoration he did last month cost them 15% more than the thought it had.
f) Word gets around that a lot of Marginal's customers have been having stomach problems lately.
g) A worker's strike reduces the pool of pizza workers available.