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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?

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a The marginal revenue of the 5000th gallon sold is 850 We know this because in the ... blur-text-image

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