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M o n o p o l y ’ s M i g h t<br />
AVOCADO HIGH SCHOOL<br />
Horace H. Hass, Principal<br />
M e m o r a n d u m<br />
Date: January 15, 2009<br />
To:<br />
From:<br />
Subject:<br />
Avocado School-Based Enterprise<br />
Avocado High School<br />
<strong>Ronnie</strong> <strong>Johnson</strong>, Faculty Advisor<br />
Competitors in our market!<br />
When I wrote you last year we had soaring profits and were seeking funding to expand production of our low<br />
calorie avocados. I wish the future could remain so rosy.<br />
Our rivals on the football field—Buchanan High School, Fillmore High School, and Pierce Academy—noticed<br />
our soaring profits and began to grow and market similar avocados. Consumers enjoy the lower price of<br />
avocados that competition created. AHS, however, saw its profits fall, even though sales remained strong. The<br />
attached table provides all the data you need to see that our profits have dropped to nothing, since we could<br />
have made as much had we invested our money in the bank instead of growing avocados.<br />
The increased competition could not have come at a worse time. That nasty bug that eats the leaves of the<br />
avocado tree—the dreaded persea mite—is starting to destroy our trees in much the same way the boll<br />
weevil worked its way through cotton crops in the South. Venture capitalists are now questioning whether our<br />
School-Based Enterprise will remain in the market. They argue that since other high schools have the same<br />
price and sales figures, our SBE will be forced out of business with too many producers in the market. They<br />
say our declining profits is evidence that our business will fold. Of course, we know that competition in market<br />
economies eliminates economic profit. But we believe that our rivals do not know about the persea mite and<br />
will fold due to their lack of preparation for the infestation. In the long run, our SBE will survive as we conquer<br />
the mite with our research.<br />
Once again I must call on you to explain why our sales, revenue, and profit numbers are consistent with<br />
competition in market economies. Venture capitalists do not care about the mites, per se. They only care<br />
about profit and want to be assured that we will regain ours. We need their confidence, and their money, to<br />
finance the Biochemistry Club’s research to develop a method for getting rid of the mite.<br />
We have managed to squeeze in a two-minute meeting with the most promising venture capitalist tomorrow<br />
morning. Please develop a presentation about the economic viability of our firm despite declining profits.<br />
© 2007 Buck Institute for Education 34<br />
August 2007 Version
Production of Low-Calorie Avocados<br />
at Avocado High School<br />
2008<br />
M o n o p o l y ’ s M i g h t<br />
Table 3A: Sales (in thousands), 2008<br />
Price<br />
1st 2nd 3rd 4th<br />
Quarter Quarter Quarter Quarter<br />
$0.49 0 0 0 0<br />
$0.59 0 0 0 0<br />
$0.69 0 0 0 0<br />
$0.79 120 120 120 120<br />
$0.89 0 0 0 0<br />
$0.99 0 0 0 0<br />
Table 3B: Total Revenue (in thousands), 2008<br />
1st 2nd 3rd 4th<br />
Price Quarter Quarter Quarter Quarter<br />
$0.49 0 0 0 0<br />
$0.59 0 0 0 0<br />
$0.69 0 0 0 0<br />
$0.79 94.8 94.8 94.8 94.8<br />
$0.89 0 0 0 0<br />
$0.99 0 0 0 0<br />
Table 3C: Costs (per avocado), 2008<br />
1st 2nd 3rd 4th<br />
Quarter Quarter Quarter Quarter<br />
$0.8 $0.7 $0.6 $0.9<br />
Table 3D: Profit (in thousands), 2008<br />
1st 2nd 3rd 4th<br />
Quarter Quarter Quarter Quarter<br />
$-1.2 $10.8 $22.8 $-13.2<br />
Note: Production numbers are for AHS only. Buchanan High School, Fillmore High School, and<br />
Pierce Academy have the same production.<br />
© 2007 Buck Institute for Education 35<br />
August 2007 Version
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