A local bakery is trying to determine how many loaves of bread to produce daily to maximize profits. They find that their marginal cost of producing each additional loaf is $2, while the price they can sell each loaf for is currently $3. What should the bakery do to maximize its profits?

To maximize profits, the bakery needs to compare the marginal cost of producing each loaf with the price they can sell it for. The marginal cost is $2, which means it costs the bakery $2 to make one more loaf. Since they can sell each loaf for $3, they make a profit of $1 on each additional loaf produced. To maximize profits, the bakery should continue producing loaves as long as the selling price is higher than the marginal cost. Therefore, they should keep making more loaves until the selling price equals the marginal cost, which in this case means producing as many loaves as possible since the current situation is already profitable.