Answer:
Laura should make fewer than 20 cakes.
Explanation:
This is because at this level of sales (20 cakes per month) where she makes a revenue of $5000, she is not maximizing profit.
First of all, in order to maximize profit, the Marginal Cost must be equal to the Marginal Revenue (MC = MR).
Marginal cost is the additional cost incurred in the production of an extra unit.
Marginal revenue is the revenue gained by the production of an extra unit.
Now, let us see the current revenue and check if it equals the marginal cost.
The total revenue per month from the sale of 20 cakes is $5,000. But the marginal cost incurred in the production of those same 20 cakes is 300 x 20 = $6,000.
We can now see that the costs incurred exceed the revenue and profit is not maximized.
Therefore Laura should reduce the quantity of cakes she produces.
