Suppose you were working for Richstone's bakery and calculating whether the bakery was making a profit, considering the recent increase in rent. You have the following data:P = $20, AVC = $10, AFC = $10, and quantity of birthday cakes produced a day is 20.You conclude that the bakery ends up at the end of the day with a
A) loss of $10
B) profit of $10
C) loss of $20
D) no loss, no profit
E) loss of $40

Question

Quizplus · Accepted Answer

The total cost (TC) is the sum of average variable cost (AVC) and average fixed cost (AFC) multiplied by the quantity, which is ($10 + $10) * 20 = $400. The total revenue (TR) is the price (P) times the quantity, which is $20 * 20 = $400. Since TR = TC, there is no loss, no profit.

Suppose You Were Working for Richstone's Bakery and Calculating Whether