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A small ice cream parlor sells $50 worth of ice cream per hour in the summer (AprilrSept) and $10 worth of ice cream per hour
A small ice cream parlor sells $50 worth of ice cream per hour in the summer (AprilrSept) and $10 worth of ice cream per hour in the winter (GetMar). Rent for the parlor is $2,000 each month, but the lease has been signed for a full year and cannot be changed, and the employee wage is 58 an hour. The parlor owner needs to make a choice about staying open through 4 months in the winter when ice cream demand is lower and whether to stay in business the next year. Assume that the ice Cream shop is open for 160 hours in a month and there are no other costs other than those discussed. a. For each of the following, explain whether they should be considered in the shortrun decision making. Revenue from selling the good. Cost related to a contract that has been signed to pay a set amount. Labor costs that are variable. Costs for ingredients. Costs for equipment that cannot be immediately sold. 1). Given the information above, should they stay open during the winter months this year? c. When making the decision about whether to renew their lease for the next year, and assuming that they anticipate the same level of revenue and costs in the future, what should the firm do
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