Carter's marginal cost and marginal worth: he undercuts Baker's third cake 0 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1 2 3 4 5 Carter's Marginal Cost Carter's Demand for Cakes Carter stops at 2 cakes for himself 0.30 Marginal Cost = 0.60Y Marginal Worth = 0.30Y 3 Cakes per Day Marginal Worth / Cost (units of Y forgone) 3rd cake: marginal cost 0.60Y, marginal worth 0.30Y. Costs him 0.60Y — but that still undercuts Baker's third cake.