QUESTION 5 Australia is home to some of the world's best pies. Yara decided to start a new bakery selling pies in Brisbane. Assume the market for pies to be a perfectly competitive one. Answer the following questions: a. Yara currently earns a normal profit. Recently, Yara found a new pie-maker with the latest cutting-edge technology. She will soon be able to greatly reduce her costs as compared to her competitors. In the short run, this will mean Yara will be earning Type E for 'Economic profit', N for 'Normal profit' or X for 'Zero accounting profit'. b. Yara decided to apply her economic knowledge to find out how well her pie shop is doing. Yara calculated that she faces an average total cost of $2.68 per pie produced. The average fixed cost is $1.99 per pie. On an average day, Yara is able to sell 358 pies. Each pie can be sold for $4.25. If Yara is not selling pies, she could be selling coffee instead which will bring her an income of $135 per Answer in dollars to the nearest two decimal day. What is Yara's economic profit for an average day? $ places. c. Yara's marginal cost is $2.68 per pie at the current level of output she is producing. In order to maximise her profits, Yara should her level of output. Type I for Increase, D for Decrease or M for Maintain.
QUESTION 5 Australia is home to some of the world's best pies. Yara decided to start a new bakery selling pies in Brisbane. Assume the market for pies to be a perfectly competitive one. Answer the following questions: a. Yara currently earns a normal profit. Recently, Yara found a new pie-maker with the latest cutting-edge technology. She will soon be able to greatly reduce her costs as compared to her competitors. In the short run, this will mean Yara will be earning Type E for 'Economic profit', N for 'Normal profit' or X for 'Zero accounting profit'. b. Yara decided to apply her economic knowledge to find out how well her pie shop is doing. Yara calculated that she faces an average total cost of $2.68 per pie produced. The average fixed cost is $1.99 per pie. On an average day, Yara is able to sell 358 pies. Each pie can be sold for $4.25. If Yara is not selling pies, she could be selling coffee instead which will bring her an income of $135 per Answer in dollars to the nearest two decimal day. What is Yara's economic profit for an average day? $ places. c. Yara's marginal cost is $2.68 per pie at the current level of output she is producing. In order to maximise her profits, Yara should her level of output. Type I for Increase, D for Decrease or M for Maintain.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:QUESTION 5
Australia is home to some of the world's best pies. Yara decided to start a new bakery selling pies in Brisbane. Assume the market for
pies to be a perfectly competitive one.
Answer the following questions:
a. Yara currently earns a normal profit. Recently, Yara found a new pie-maker with the latest cutting-edge technology. She will soon
be able to greatly reduce her costs as compared to her competitors. In the short run, this will mean Yara will be earning
Type E for 'Economic profit', N for 'Normal profit' or X for 'Zero accounting profit'.
b. Yara decided to apply her economic knowledge to find out how well her pie shop is doing. Yara calculated that she faces an average
total cost of $2.68 per pie produced. The average fixed cost is $1.99 per pie. On an average day, Yara is able to sell 358 pies. Each
pie can be sold for $4.25. If Yara is not selling pies, she could be selling coffee instead which will bring her an income of $135 per
Answer in dollars to the nearest two decimal
day. What is Yara's economic profit for an average day? $
places.
c. Yara's marginal cost is $2.68 per pie at the current level of output she is producing. In order to maximise her profits, Yara should
her level of output. Type I for Increase, D for Decrease or M for Maintain.
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