Helen makes cheesecakes using equipment that she rents for $300 and cheese and butter that cost $4.55 a cake. She hires workers and finds that they produce according to the following schedule: Workers are paid $10/hour.
A. Calculate and graph the marginal cost of each cheesecake. Why does the MC curve have the slope (up, down, or flat) that it does?
B. Calculate and make a new graph giving the marginal cost of each cheesecake if workers become 25% more productive, that is to say, if each cake can be made with only 75% as much labor.
C. Calculate and make a new graph of the marginal cost if workers get a raise to $15/hour, with the old productivity.
Cheesecake Labor:
1 ............. 0.1
2 ............. 0.25
3 ............. 0.475
4 ............. 0.8125
5 ............. 1.31875
6 ............. 2.078125
7 ............. 3.217188
8 ............. 4.925781