Question5 and question 6 QUESTION 5 Australians are one of the highest per capit

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Question5 and question 6

QUESTION 5 Australians are one of the highest per capita consumers of coffee in the world. Their coffee consumption has been increasing over the years. As a result, a large number of cafes have continued to open across Brisbane to cater for this increasing demand. Answer the following questions: a. Imagine a new style of espresso machine is invented that is cheaper to operate compared to previous espresso machines. This machine is quickly adopted by all cafes in Brisbane. Assuming the market price of coffee stays constant in the short run, this creates an incentive for cafes to the Brisbane market. Type E for Enter or X for Exit. b. Imagine Josh's café has an average total cost (which excludes opportunity cost) of $3.10 per coffee, and accounting profit of $0.60 per Answer in dollars to the nearest two coffee. What must the current market price of coffee be in this situation? $ decimal places. c. Consider Brisbane today has become oversupplied with cafes selling coffee. This has driven the price down to $3.00 per coffee. Josh begins experiencing economic losses in his cafe. He decides to extend his opening hours to sell more coffees, believing this wil increase his revenues as well as increase his profit. Does this make economic sense? No. Type Y for Yes or N for

Explanation / Answer

a) The new machine will increase the profit of the firms in the market and it will attract new sellers. The answer is "Enter".

b) $3.70 will be the selling price of the coffee in the market.

c) No, because the opportunity cost of making a coffee is $3.10, they can do something else. making coffee and selling it below the opportunity cost is actually bearing loss.

2) having a patent gives Fred a monopoly over the market. He is the only seller in the market who can sell the drugs. The answer is "D", Fred will be able to exert monopoly power when pricing new drug.  

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