QUESTION 5

1. 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.
2. Answer the following questions:
3. 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.
4. Imagine Josh's caf has an average total cost (which excludes opportunity cost) of $3.10 per coffee, and accounting profit of $0.60 per coffee. What must the current market price of coffee be in this situation? $_______________. Answer in dollars to the nearest two decimal places.
5. 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 will increase his revenues as well as increase his profit. Does this make economic sense?______________________. Type Y for Yes or N for No.