Final answer:
The marginal cost for JoAnn's gelatin business at 20 pounds is $1.00, as this is the cost that would allow the firm to maximize profit in a perfectly competitive market where price equals marginal cost.
Step-by-step explanation:
The student asked about the marginal cost for JoAnn's gelatin business at a production level of 20 pounds per day in a perfectly competitive market. We know that Marginal Cost (MC) is the additional cost incurred by producing one more unit of a good or service. In a perfectly competitive market, firms maximize profit where the price equals the marginal cost (P=MC). In this scenario, the price of gelatin is $2.00 per pound.
The marginal cost for producing 10 pounds is $0.50, and we're given the marginal costs at higher quantities, but need to find the missing MC at 20 pounds. Given the data in the question and understanding that marginal cost would increase after a certain number of units due to the law of diminishing returns, we can deduce that the correct marginal cost at 20 pounds would be neither negative nor higher than the price since the firm is still making a profit.
Therefore, the marginal cost at 20 pounds is $1.00, as it must be equal to the price for the firm to profit maximize in a perfectly competitive market.