A Restaurant Is Facing a Decision About Whether It Should

question 263

Multiple Choice

A restaurant is facing a decision about whether it should bake its own apple pies or whether it should continue to purchase the pies from a local bakery. Which of the following costs would be relevant to its decision?

• A)The salary of the restaurant manager
• B)The price the restaurant sells the apple pies for
• C)The purchase price of the apple pies purchased from the local bakery
• D)The original purchase price of the current machinery

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Definitions:

Marginal Cost

The cost incurred by producing one additional unit of the product.

Monopolist

A Monopolist is a sole provider of a product or service in a market, facing no competition and having the power to control prices and market supply.

Perfect Price Discrimination

A pricing strategy where a seller charges each buyer their maximum willingness to pay, capturing the entire consumer surplus.

Average Revenue

The revenue a company receives per unit of goods or services sold, calculated by dividing total revenue by the number of units sold.