What is the marginal cost for cakes

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Assume that labour can only be added in hour increments. Each cake requires labour, ingre- dients and the use of a kitchen. The kitchen you rented for $3,000 per month can handle any level of output.

(a) The price of labour is $24 per hour. At your current level of production, the marginal product of labour is 3. "That is the increase in variable costs if you hire an extra hour of labour, and each cake requires $2 in ingredients? If you divide this increase in variable costs evenly across your newly produced cakes, what is the marginal cost for each of these cakes?

(b) The price of labour is $24 per hour. At your current level of production, the marginal product of labour is 4. 'What is the increase in variable costs if you hire an extra hour of labour, and each cake requires $2 in ingredients? If you divide this increase in variable costs evenly across your newly produced cakes, what is the marginal cost for each of these cakes?

Reference no: EM133064233

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