Suppose Sarah Owns a Small Company That Makes Wedding Cakes

Suppose Sarah owns a small company that makes wedding cakes. The accompanying table shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day. $$\begin{array} { | c | c | } \hline \text { Number of Cales Per Day } & \text { Tatal Cast Per Day } \\\hline 0 & \$ 100 \\\hline 1 & \$ 180 \\\hline 2 & \$ 220 \\\hline 3 & \$ 300 \\\hline 4 & \$ 400 \\\hline 5 & \$ 520 \\\hline 6 & \$ 660 \\\hline\end{array}$$  
If Sarah's fixed costs double, then in the short run, her profit-maximizing level of output:

A) will shrink to zero if she starts earning a loss.
B) will increase.
C) will decrease.
D) will not change.

Correct Answer:

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