Table 16-6
Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's.
-Refer to Table 16-6. At the profit-maximizing quantity, what is Beatrice's total profit?

Question

Table 16-6
Beatrice's Birthday Cakes is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's. 
-Refer to Table 16-6. At the profit-maximizing quantity, what is Beatrice's total profit?

Quizplus · Accepted Answer

To find the profit-maximizing quantity, we need to look for the quantity where marginal revenue (MR) equals marginal cost (MC). From the table, we can see that at a quantity of 7 cakes, the MR=$26 and the MC=$20, which means the profit per cake is $6. At a quantity of 8 cakes, the MR=$25 and the MC=$26, which means the profit per cake is -$1. Therefore, the profit-maximizing quantity is 7 cakes, with a total profit of 7*$6=$42. However, we also need to consider the fixed cost of $59, which means the total profit is $101 (revenue of $185 - variable cost of $90 - fixed cost of $59). Thus, the best choice is C.

Table 16-6 Beatrice's Birthday Cakes Is One Bakery Among Many in the in the Market