A bakery currently produces 100 loaves of bread per day. Due to an increase in demand, the owner considers producing an additional loaf. If the cost of ingredients for that loaf is $2 and the fixed costs remain unchanged, what should the owner consider when deciding whether to increase production by one loaf?

When the bakery owner thinks about producing one more loaf of bread, they need to consider the concept of marginal cost, which is the cost of making one additional item. In this case, the cost of ingredients for that extra loaf is $2. The owner should compare this cost to the additional revenue that selling the extra loaf would bring in. If they can sell the loaf for more than $2, it would make sense to increase production since it would lead to more profit. For example, if the bakery sells each loaf for $5, the owner would earn $3 more by producing that extra loaf, making it a good decision.