Question

the cost of and return on pie production
what most likely will happen if the pie maker bakes a seventh pie?
the marginal cost will most likely decrease to $1.00
the marginal cost will most likely increase to $2.00
the marginal revenue will most likely decrease to $8.00
the marginal revenue will most likely increase to $12.00

pies produced per day

total cost

marginal cost

total revenue

marginal revenue

profit

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----

----

----

----

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0

$0.00

$0.00

—

—

$0.00

1

$1.00

$1.00

$10.00

$10.00

$9.00

2

$1.50

$0.50

$20.00

$10.00

$18.50

3

$1.75

$0.25

$30.00

$10.00

$28.25

4

$2.25

$0.50

$40.00

$10.00

$37.75

5

$3.50

$1.25

$50.00

$10.00

$46.50

6

$5.00

$1.50

$60.00

$10.00

$55.00

Explanation:

Step1: Analyze marginal cost trend

Observe marginal cost values: $0.00, $1.00, $0.50, $0.25, $0.50, $1.25, $1.50. After the initial decrease, marginal cost rises as output increases, following diminishing returns.

Step2: Analyze marginal revenue trend

Marginal revenue is constant at $10.00 for all pies produced so far, meaning the firm is in a perfectly competitive market with a fixed price per pie.

Step3: Evaluate each option

• Option1: Marginal cost is rising, not decreasing. Incorrect.
• Option2: Marginal cost has increased from $1.25 to $1.50 for the 6th pie; a 7th will likely continue this upward trend to ~$2.00. Correct.
• Option3: Marginal revenue stays constant at $10.00. Incorrect.
• Option4: Marginal revenue stays constant at $10.00. Incorrect.

Answer:

The marginal cost will most likely increase to $2.00