Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Produce the extra batch to maximize profits
B
Not produce the extra batch to avoid losses
C
Produce the extra batch but increase prices
D
Continue to produce without considering costs
Understanding the Answer
Let's break down why this is correct
Answer
If the bakery finds that the marginal cost of producing an extra batch of cookies is higher than the marginal benefit they would receive from selling those cookies, it should not produce that batch. Marginal cost refers to the additional cost incurred from making one more batch, while marginal benefit is the extra revenue gained from selling it. For example, if it costs the bakery $50 to make another batch but they would only earn $40 from selling it, they would lose money. In this situation, it is better for the bakery to save resources and focus on producing cookies where the benefits outweigh the costs. This decision helps the bakery optimize its profits and avoid unnecessary losses.
Detailed Explanation
If it costs more to make the cookies than what they will earn, it's better not to make them. Other options are incorrect because Some might think making more cookies will always help profits; Raising prices might seem like a solution, but if costs are too high, customers may not buy the cookies.
Key Concepts
Optimization in Microeconomics
Marginal Analysis
Resource Allocation
Topic
Optimization in Microeconomics
Difficulty
medium level question
Cognitive Level
understand
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