A cupcake store is located in a mall and is the only cupcake store in that mall.
ID: 1098365 • Letter: A
Question
A cupcake store is located in a mall and is the only cupcake store in that mall. The demand schedule for cupcakes (per dozen) is given in the table below. If the marginal cost to produce a dozen cupcakes is $4 per unit, how many units should the firm produce?
Price
Quantity Purchased
(Dozen per day)
$12
3
$11
7
$10
12
$9
20
$8
35
$7
60
$6
100
$5
160
$4
250
Price
Quantity Purchased
(Dozen per day)
$12
3
$11
7
$10
12
$9
20
$8
35
$7
60
$6
100
$5
160
$4
250
Explanation / Answer
to maximize profit
MR = MC
MR = (100*6-60*7)/40 = 4.5
No of unit should be sold = 80 dozen
MR = (160*5-100*6)/60 = 3.33
(60,4.5), ( 100,3.33)
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