Question

At Nick's Bakery, the cost to make his homemade chocolate cake is $3 per cake. He sells three and receives a total of $21 worth of producer surplus. Nick must be selling his cakes for:

a) $2 each
b) $7 each
c) $3 each
d) $10 each

Answer 1

Nick must be selling his homemade chocolate cakes for $10 each.

Step-by-step explanation:

The given information states that Nick's Bakery incurs a cost of $3 to make one chocolate cake.

Let's assume Nick sells each cake for x dollars. To find the Producer Surplus, we need to find the difference between the selling price and the cost price of each cake. Given that the total producer surplus is $21 and that Nick sells three cakes, we can set up the equation:

1. Producer Surplus = Selling Price - Cost Price
2. $21 = 3x - (3 * $3)
3. $21 = 3x - $9
4. $21 + $9 = 3x
5. $30 = 3x
6. $30/3 = x

Therefore, Nick must be selling his cakes for $x = $10 each. So, the correct answer is option d) $10 each.