Aidy’s Apple Pies is a roadside business. Aidy must pay $9.00 in rent each day. In addition, it costs her $1.00 to produce the first pie of the day, and each subsequent pie costs 50% more to produce than the one before. For example, the second pie costs

$1.00 × 1.5 = $1.50 to produce, and so on.

a. Calculate Aidy’s marginal cost, variable cost, average total cost, average variable cost, and average fixed cost as her daily pie output rises from 0 to 6.

b. Indicate the range of pies for which the spreading effect dominates and the range for which the diminishing returns effect dominates.

c. What is Aidy’s minimum-cost output? Explain why making one more pie lowers her average total cost when output is lower than the minimum-cost output. Similarly, explain why making one more pie raises Aidy’s average total cost when output is greater than the minimum-cost output.