(Table: Costs for Birthday Cakes) Annie has a bakery that specializes in birthday cakes, and her variable costs of producing cakes are shown in the table Costs of Birthday Cakes.Assume that her fixed costs are $10.What is the marginal cost of the fifth cake?

Question

Quizplus · Accepted Answer

Marginal cost is the cost of producing one additional unit. To calculate the marginal cost of the fifth cake, we need to see the change in total cost when going from producing four cakes to five cakes.

The total cost of producing four cakes is $25 ($5+$6+$7+$7) and the total cost of producing five cakes is $37 ($5+$6+$7+$7+$12). The change in total cost is therefore $12.

So the marginal cost of the fifth cake is $12.

Therefore, the best choice is C.

(Table: Costs for Birthday Cakes) Annie Has a Bakery That