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. In order to produce pies faster and cheaper, Yara found a new pie-maker with the latest cutting-edge technology. She is able to greatly reduce her costs as compared to her competitors. However, after a few years, everyone started using the same pie-maker and are similarly able to reduce their costs. In the long run, Yara will earn a/an ___profit. Type E for Economic, A for Accounting or N for Normal
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 day. Help calculate Yara's economic profit for an average day. $
c. Given that 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.