Final answer:
Considering the entrepreneur's average total cost of $7 and variable costs of $5 per pack, alongside the competitor's selling price of $10 per pack, it is likely that the new business could cover its variable costs and contribute to fixed costs if able to sell at a similar price. Deciding to start the business should factor in not just these cost considerations but also market demand and potential barriers to entry.
Step-by-step explanation:
The decision of whether the entrepreneur should start a gourmet cookie dough business should be based on comparison of costs and potential revenues. The estimated average total costs for the entrepreneur's product are $7 per pack, with variable costs being $5. If the local competitor sells similar cookie dough for $10 per pack with total costs of $8 (variable costs of $7), the entrepreneur could potentially enter the market successfully, assuming they can sell at a similar price or higher.
Based on the provided reference information, it seems beneficial to start a business if the price of your product is above the average variable cost. Since the entrepreneur's average variable cost is $5 and the competitor's price is $10, it is likely that the entrepreneur can cover their variable costs and part of the fixed costs, thereby minimizing losses as compared to not starting the business at all.
It's critical to remember that this analysis is based on the costs and pricing data provided; the decision should also consider other factors such as market demand, competition, startup costs, and potential market entry barriers.