A local bakery is deciding how many loaves of bread to bake each day. They find that baking an additional loaf costs them $2 in ingredients and labor, but it sells for $3. However, if they bake too many loaves, they risk having unsold bread that they must discount, which could lead to a loss of $1 per loaf. Considering these factors, how should the bakery approach their daily production decision to optimize their profits?

The bakery should carefully consider the costs and potential earnings from baking each loaf of bread. Since baking an additional loaf costs $2 but sells for $3, they make a profit of $1 for each additional loaf sold. However, if they bake too many and have unsold loaves, they could lose $1 on each loaf that they have to discount. To optimize profits, the bakery should bake enough loaves to meet demand without exceeding it, ensuring they maximize their profit while minimizing losses from unsold bread. For example, if they estimate they can sell 50 loaves a day, they should aim to bake close to that number, adjusting based on sales patterns to find the best balance.