Question

Laura is a gourmet chef who runs a small catering business in a perfectly competitive industry....

Laura is a gourmet chef who runs a small catering business in a perfectly competitive industry. Laura is operating her business in the short-run. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $200. To maximize profits, Laura should

continue to make 20 wedding cakes per month, because price is equal to marginal revenue and it is also equal to the marginal cost of making a wedding cake at that quantity of cakes she makes and sells.

make more than 20 wedding cakes per month, because her marginal revenue exceeds marginal cost of making a wedding cake.

shut down.

make fewer than 20 wedding cakes per month, because her marginal revenue exceeds marginal cost of making a wedding cake.

Homework Answers

Answer #1

C is right option

Laura is a gourmet chef who runs a small catering business in a perfectly competitive industry. Laura is operating her business in the short-run. Laura specializes in making wedding cakes. Laura sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $200. To maximize profits, Laura should

make fewer than 20 wedding cakes per month, because her marginal revenue exceeds marginal cost of making a wedding cake.

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