• Over recent years, Australian residential properties have attracted considerable interest from overseas investors. This has resulted in a significant increase in the number of new apartment developments, particularly in Fortitude Valley and Newstead.

  Answer the following questions:

  1. Metro Properties is currently producing apartments that result in their marginal cost being lower than the market price of the apartments. Taking the apartment construction industry as perfectly competitive, this suggests that Metro Properties should ___________ the number of apartments it is currently building to maximize economic profits. Type I for increase, D for decrease, or M for maintain.
  2. Assume that Metro Properties currently sells 42 apartments per year in Newstead for an average of $570,000. If the average total cost (which includes the opportunity cost) is equal to 70% of the selling price, what is the economic profit generated by Metro's Newstead operations in millions of dollars to three decimal places? $ ___________ million. Answer in millions of dollars (with three decimal places).
  3. If other construction companies can copy Metro's operations, it is likely that these other companies will ___________ the Newstead apartment market. Type E to Enter or X to Exit.

  
  

 

Answer rating: 100% (QA)

1 Metro Properties should D decrease the number of apartments it is currently building to maximize e... View the full answer