Question

Yam is a gourmet chef who runs a small catering business in a competitive industry. Yam specializes in making wedding cakes. Yam sells 20 wedding cakes per month. Her monthly total revenue is $5,000. The marginal cost of making a wedding cake is $300. In order to maximize profits, Yam should:

Answer 1

She should continue producing 20 wedding cakes a month.

Step-by-step explanation:

From the information in the question

Revenue per unit= Total revenue/Units produced

Revenue per unit= 5000/20= $250

We were given the marginal cost as $200

So our revenue per month ($250) is higher than marginal cost ($200)

Yam is making a profit of $50, so she should continue producing 20 cakes per month