2. The market for a cup of coffee in Pittsburgh is highly competitive. The market demand for a cup of coffee can be summarized by the function: D(p)=2000330p. Consider each coffee shop to be an individual firm with the same cost function C(q)=FC+23q2, where FC represents fixed cost of renting a space from which to sell coffee, and the variable costs reflect the cost of the labor involved in producing and selling coffee. a. In the short-run (e.g. the six months following the signing of a lease for a space from which to sell coffee) determine the quantity each coffee shop would produce for any price in the market. b. In what way does your answer to part (a) depend on the fixed cost? Explain your answer in no more than two sentences. c. Suppose initially there are 10 coffee shops selling coffee in Pittsburgh. Derive an expression for the short-run market supply for coffee. d. Find the short-run equilibrium price and quantity in the Pittsburgh coffee market. How does this equilibrium depend on F? Note: these quantity numbers are not meant to seem realistic. e. Give an expression for an individual coffee firm's profits in the short run. Under what circumstances does each coffee shop earn positive, negative, or 0 profits. How do coffee shop profits depend on FC ? Explain. f. Is there a nonzero price low enough that the firm should decide to shutdown in the short-run? In no more than three sentences, support your answer with evidence derived from your knowledge of this firm's costs. 2. The market for a cup of coffee in Pittsburgh is highly competitive. The market demand for a cup of coffee can be summarized by the function: D(p)=2000330p. Consider each coffee shop to be an individual firm with the same cost function C(q)=FC+23q2, where FC represents fixed cost of renting a space from which to sell coffee, and the variable costs reflect the cost of the labor involved in producing and selling coffee. a. In the short-run (e.g. the six months following the signing of a lease for a space from which to sell coffee) determine the quantity each coffee shop would produce for any price in the market. b. In what way does your answer to part (a) depend on the fixed cost? Explain your answer in no more than two sentences. c. Suppose initially there are 10 coffee shops selling coffee in Pittsburgh. Derive an expression for the short-run market supply for coffee. d. Find the short-run equilibrium price and quantity in the Pittsburgh coffee market. How does this equilibrium depend on F? Note: these quantity numbers are not meant to seem realistic. e. Give an expression for an individual coffee firm's profits in the short run. Under what circumstances does each coffee shop earn positive, negative, or 0 profits. How do coffee shop profits depend on FC ? Explain. f. Is there a nonzero price low enough that the firm should decide to shutdown in the short-run? In no more than three sentences, support your answer with evidence derived from your knowledge of this firm's costs