Question

Food Fanatics caters meals where their cost of producing an extra meal is $25. Each of their meals is standard and sells for $20. At this rate what should the company do?

a. Produce more meals and increase their profit
b. Produce fewer meals and increase their profit
c. Not change production
d. None of the above

Answer 1

B

Step-by-step explanation:

The marginal cost of producing food is $25, which is greater than the price of selling the food.

At this point the firm is incurring a loss. In order to improve profit margins, the firm should reduce the amount of meals been produced, so that profit would increase