Answer to Question #192059 in Microeconomics for Sam

Question

A bakery shop sells fresh baked bread from 5 a.m. until 3 p.m. every day. Any bread not sold by the end of the day is thrown away. The bread packet cost Rs.8 to produce and the bakery is selling a dozen bread is at Rs.10.00.Since this shop does not sell old bread the next day, what minimum price the bakery should charge if he still has 10 dozen left at 2:30 p.m.?

Answer 1

cost for a packet of bread = RS. 8

Selling price =RS. 10

Remaining loaves of bread = 10

Owner should sell the remaining loaves of bread at any price above $0

Since Owner is throwing the remaining loaves of bread so by selling them, He would be able to recover some of its fixed costs whereas by just throwing them away she is incurring a fixed cost Rs 8 per packet of bread . So Owner should minimize her cost by selling them at any price above $0.