Question
Your firm, BrainFreeze and Go, is an ice cream seller, one of many small firms in a monopolistically competitive environment. You are currently operating in
Your firm, BrainFreeze and Go, is an ice cream seller, one of many small firms in a monopolistically competitive environment.
You are currently operating in the short-run when your assistant brings you the current data:
Data | Value |
---|---|
Variable Cost Per Gallon Sold | $7.50 |
Marginal Cost of Last Gallon Produced | $6.00 |
Number of Gallons Sold | 5,000 |
Fixed Cost Per Gallon Sold | $3.50 |
Your company is currently producing at the profit-maximizing output level, charging a price per gallon of $8.50.
a) What is the marginal revenue of the 5,000th gallon sold? How do you know?
b) Should your company continue production in the short-run or shut down? How can you determine this without calculating anything?
c) What is your short-run economic profit?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
a The marginal revenue of the 5000th gallon sold is 850 We know this because in the ...Get Instant Access to Expert-Tailored Solutions
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Step: 2
Step: 3
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