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Homework answers / question archive / At Nick's Bakery, the cost to make homemade chocolate cake is $3 per cake
At Nick's Bakery, the cost to make homemade chocolate cake is $3 per cake. As a result of selling three cakes, Nick experiences a producer surplus in the amount of $19.50. Nick must be selling his cakes for:
a. $6.50 each.
b. $7.50 each.
c. $9.50 each.
d. $10.50 each.
The answer is C).
Since that total producer surplus is $19.50 and 3 cakes are sold, so producer surplus per unit is 19.50 / 3 = 6.5. Producer surplus is price per unit minus the cost per unit. Each unit cost is 3, so the price is 3 + 6.5 = $9.5.
