Final answer:
The firm's chosen price accounts for production costs and the desired profit margin, constituting a strategic point on its supply curve that aims to cover all costs and achieve profitability.
Step-by-step explanation:
The firm set the price of their product by considering the marginal costs of producing their pizzas which include the cost of ingredients such as dough, sauce, cheese, and pepperoni, the cost of the pizza oven, shop rent, and workers' wages. Additionally, they accounted for their desired profit margin, which is influenced by the profit margins typical to their industry.
To determine the selling price, they summed these two elements: the production costs and desired profit. This calculation results in a price point on the firm's supply curve that aims to cover all costs and earn a profit, ensuring the shop's financial success and sustainability.