Question

Zoe's Bakery operates in a perfectly competitive industry. Suppose that when the market price is $5, the profit-maximizing output level of pastries is 150 units, with average total cost of $4, and average variable cost of $3. From this we know Zoe's marginal cost is ________, and her short-run profits are ________.

Answer 1

Answer:

$3 is Zoe's Bakery marginal cost and Short run profits are $150.

Explanation:

As a change in quantity is not specified, then, The Marginal cost is the average variable cost of producing 1 unit ($3). And the profit at 150 units produced and sell at a price of $5 is $150 as revenue is $750 and total cost is $600.