Happy Bagels Sells Its Bagels for $6 Each and the Firm

question 56

Multiple Choice

Happy Bagels sells its bagels for $6 each and the firm has a constant marginal cost of $4 per bagel, which is equal to its (constant) average total cost. If Happy Bagels does not sell a bagel the day it is produced, the bagel is sold as day- old for $2. If Happy Bagels is currently holding 50 bagels in inventory and the probability that Happy Bagels will sell 50 bagels or more is 0.60, which of the following statements is true?

• A)To obtain the profit- maximizing, optimal level of inventory, Happy Bagels needs to increase its inventory.
• B)Happy Bagels is holding the profit- maximizing, optimal level of inventory.
• C)To obtain the profit- maximizing, optimal level of inventory, Happy Bagels needs to decrease its inventory.
• D)To obtain the profit- maximizing, optimal level of inventory, Happy Bagels needs to decrease its inventory by exactly one- half.

---

Definitions:

Scarce Resources

Natural, human, and artificial resources that are limited in supply and cannot satisfy all human wants and needs.

Secondary Effects

The unintended consequences of economic actions, which can occur as indirect results of a policy or event.

Economic Actions

Decisions or behaviors taken by individuals, firms, or governments that affect the production, distribution, and consumption of goods and services.

Positive Economic Statement

An objective statement about the economy that can be tested and validated through observation.