You have to include as much diagrams as possible to illustrate your answers. The
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You have to include as much diagrams as possible to illustrate your answers. The more you use the better. Be very accurate and explicative. Every explication which can be accompanied with a graph is compulsory.
Question 1: The market for cups of coffee is competitive in the sense that it cannot influence the market price. a) Zhichao and Mitran are opening a coffee shop. The market price of a cup of coffee is £2. They are not sure if they should open the business. They show you various cost curves they have calculated and ask for your advice. Explain how you would use the cost curves to determine whether the business would be profitable. b) A year later the price of coffee falls to £1.50 and it is not expected to change again. The coffee shop “Z&M Espresso” is not profitable. Zhichao suggests they should shut down straight away whereas Mitran thinks they should wait until the end of the year shutting down. They ask for your advice again. Explain under what conditions would be right and under what conditions Mitran would be right.
Jack tells you that his weight fluctuated several times over the last ten years. But in 2021, he decided to enter into a contract the terms of which required him to pay out £200 each week if he failed to get closer to his goal of losing 10 kg. What is this person doing and why? And do you think this worked? Discuss with reference to theoretical insights in microeconomics. Sarah, your friend is an estate agent and tells you that a bungalow was for sale year with no offers at £250,000. It was taken off the market, and relisted 2 months later at £299,500 and sold in 3 weeks. Use the behavioral economic concepts learnt in the module to explain to her why.