Avocados have been proven to bring many health benefits if consumed regularly. Many others including Gavin are huge fans of avocados and have plans to start a new business selling avocados. Assume the market for avocados to be perfectly competitive. Answer the following questions: a. If these firms are able to continue entering the market for avocados, it is likely that they are earning an economic profit. In order to earn an economic profit, firms must ensure that the price is above its Type ATC for Average Total Cost, AVC for Average Variable Cost, TC for Total Cost or VC for Variable Cost. b. Gavin decided to build an avocado farm in Brisbane. It is estimated that Gavin will need to spend $14.55 thousand on farming equipment costs. Gavin will also need to spend $20.95 thousand on labour and overhead costs. However, it is expected that Gavin will be able to sell 5 tonnes of avocados and gain revenue of $47.66 thousand from selling these avocados. Calculate the thousand. Answer to the nearest two decimal economic profit for Gavin in starting this new project. $ places in thousands. c. Queensland Health agrees that Avocados bring large benefits to consumers. They decided to give avocados farmers a subsidy/grant in order to boost the supply of avocados. Will we expect the economic profit for Gavin's avocado farm to increase or decrease? Type I for Increase, D for Decrease or U for Unsure.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Avocados have been proven to bring many health benefits if consumed regularly. Many others including Gavin are huge fans of
avocados and have plans to start a new business selling avocados. Assume the market for avocados to be perfectly competitive.
Answer the following questions:
a. If these firms are able to continue entering the market for avocados, it is likely that they are earning an economic profit. In order to
earn an economic profit, firms must ensure that the price is above its
Type ATC for Average Total
Cost, AVC for Average Variable Cost, TC for Total Cost or VC for Variable Cost.
b. Gavin decided to build an avocado farm in Brisbane. It is estimated that Gavin will need to spend $14.55 thousand on farming
equipment costs. Gavin will also need to spend $20.95 thousand on labour and overhead costs. However, it is expected that
Gavin will be able to sell 5 tonnes of avocados and gain revenue of $47.66 thousand from selling these avocados. Calculate the
thousand. Answer to the nearest two decimal
economic profit for Gavin in starting this new project. $
places in thousands.
c. Queensland Health agrees that Avocados bring large benefits to consumers. They decided to give avocados farmers a
subsidy/grant in order to boost the supply of avocados. Will we expect the economic profit for Gavin's avocado farm to increase or
decrease?
Type I for Increase, D for Decrease or U for Unsure.

Expert Solution

Step 1: Define Economic Profit

Economic profit, also known as pure profit or supernormal profit, is a measure of a firm's profitability that takes into account both explicit and implicit costs. It represents the profit earned by a business after deducting all explicit costs, including operating expenses, wages, rent, and interest on borrowed capital, as well as the opportunity cost of the resources and capital employed in the business.

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