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.

CheesecakeLabor

1 .............0.1

2 .............0.25

3 .............0.475

4 .............0.8125

5 .............1.31875

6 .............2.078125

7 .............3.217188

8 .............4.925781