A baker wants to establish a pie factory. The cost of leasingthe factory is $1,000 per day. The profit maximizing quantityof pies is 1,000 pies a day. Each pie sells for $3 and costs only$2.10 to make. Which of the following is a correct conclusionbased on this data?

Question

Quizplus · Accepted Answer

The profit maximizing quantity of 1,000 pies a day will result in a profit of only $300 ($3 revenue - $2.10 cost per pie = $0.90 profit per pie x 1,000 pies = $900 profit - $1,000 lease cost = -$100 net profit). Therefore, the baker should not enter the industry as they will make a loss at the profit maximizing quantity.

A Baker Wants to Establish a Pie Factory