Question
Stacy's Cupcakery operates in a perfectly competitive market (among many other identical cupcake producers), in which gourmet cupcakes sell for $5 each. Stacy's total cost
Stacy's Cupcakery operates in a perfectly competitive market (among many other identical cupcake
producers), in which gourmet cupcakes sell for $5 each. Stacy's total cost each day (TC) and
marginal cost (MC) for each unit are
TC=80+0.05q2?
MC=0.1q?
A. Assume that Stacy has already paid her fixed costs today. Solve numerically for the number of
cupcakes that Stacy should produce if she wants to maximize short-run profit.
B. On the graph below, plot Stacy's marginal cost curve and (residual) demand curve. Make sure
to label all axes and curves, as well as the equilibrium price and quantity.
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