Zoe's Bakery operates in a perfectly competitive industry.When the market price of iced cupcakes is $5,the profit-maximizing output level is 150 cupcakes.Her average total cost is $4,and her average variable cost is $3.Zoe's marginal cost is _____,and her short-run profit is _____.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, the price equals marginal cost at the profit-maximizing output. Therefore, Zoe's marginal cost is $5. Her profit is calculated as (Price - Average Total Cost) x Quantity = ($5 - $4) x 150 = $150.

Zoe's Bakery Operates in a Perfectly Competitive Industry