Examlex

Solved

A Local Bakery Is Suddenly Inundated with Many More Orders

question 64

Multiple Choice

A local bakery is suddenly inundated with many more orders for wedding cakes than it has the physical capacity to make. Rather than turn away customers, the owner decides to rent another kitchen across town to fulfill all of the orders. But she needs to borrow money to pay for the rent and additional workers, the additional cost of which will be paid by the profits from the additional cakes. Which of the following ratios will be most affected by this decision?


Definitions:

Marginal Cost

The expense incurred from manufacturing an extra unit of a product or service.

Total Social Benefit

The total benefit to society from producing or consuming a good, including both private benefits and any external benefits.

Total Individual Benefit

The total value or satisfaction that an individual derives from consuming a particular quantity of goods or services.

Marginal Benefit

The supplementary enjoyment or advantage gained by consuming another unit of a good or service.

Related Questions