If Homer operates a small bakery and sells donuts for $4/dozen, he should:
A) sell an additional dozen donuts as long as the marginal cost of producing an additional dozen donuts is less than $4.
B) sell an additional dozen donuts as long as the total cost of producing an additional dozen donuts is less than $4.
C) only sell more donuts if his total revenue is greater than his total cost.
D) sell an additional dozen donuts so long as the fixed cost of production is greater than $4.

Question

Quizplus · Accepted Answer

If Homer sells an additional dozen donuts, he will receive $4 in revenue. In order to determine if he should sell more, he needs to consider the marginal cost of producing an additional dozen donuts. If the cost is less than $4, he will make a profit. Therefore, choice A is the best option.

If Homer Operates a Small Bakery and Sells Donuts for $4/dozen