Laura is a gourmet chef who runs a small catering business in a competitive industry.Laura specializes in making wedding cakes.Laura sells 20 wedding cakes per month.Her monthly total revenue is $5,000.The marginal cost of making a wedding cake is $300.In order to maximize profits,Laura should

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To maximize profits, Laura should produce at the point where marginal revenue equals marginal cost (MR=MC). Since her total revenue is $5,000 with 20 wedding cakes sold per month, her average revenue per wedding cake is $5,000/20 = $250. If the marginal cost of producing a cake is $300 and the price she can sell it for is $250, then she incurs a loss per cake produced. Therefore, she should make fewer than 20 wedding cakes per month in order to reduce her costs and maximize profits.

Laura Is a Gourmet Chef Who Runs a Small Catering