Answered: 2. Since a firm in a perfectly…

2. Since a firm in a perfectly competitive market is a price taker, the demand for this firm's product is essentially a horizontal line. True O False

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 5SCQ: Explain in words why a profit-maximizing film will not choose to produce at a quantity where...

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3. The components of marginal revenue Sean's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Sean produced eight fire engines, but he has decided to increase production to nine fire engines. The following graph shows the demand curve Sean faces. As you can see, to sell the additional engine, Sean must lower his price from $80,000 to $60,000 per fire engine. Note that while Sean gains revenue from the additional engine he sells, he also loses revenue from the initial eight engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $60,000 rather than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $60,000. PRICE (Thousands of dollars per fire engine) Sean 100 90 80 70 40 10 ++ 0 0 1 True + 2 False 3 4 5 QUANTITY…
3. The components of marginal revenue Lorenzo's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Lorenzo produced five fire engines, but he is considering increasing production to six fire engines. The following graph shows the demand curve Lorenzo faces. As you can see, to sell the additional engine, Lorenzo must lower his price from $105,000 to $90,000 per fire engine. Note that although Lorenzo would gain revenue from the additional engine he sells, he would also lose revenue from the initial five engines because he would have to sell them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $90,000 rather than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $90,000. PRICE (Thousands of dollars per fire engine) 150 135 120 105 90 75 60…
3. The components of marginal revenue Bob's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Bob produced five fire engines, but he has decided to increase production to six fire engines. The following graph shows the demand curve Bob faces. As you can see, to sell the additional engine, Bob must lower his price from $160,000 to $120,000 per fire engine. Note that while Bob gains revenue from the additional engine he sells, he also loses revenue from the initial five engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $120,000 rather than $160,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $120,000. PRICE (Thousands of dollars per fire engine) 200 180 160 140 120 100 80 60 40 20 0 + 0 1 2 Bob in this scenario.…
3. The components of marginal revenue Alex's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Alex produced eight fire engines, but he has decided to increase production to nine fire engines. The following graph shows the demand curve Alex faces. As you can see, to sell the additional engine, Alex must lower his price from $80,000 to $40,000 per fire engine. Note that while Alex gains revenue from the additional engine he sells, he also loses revenue from the initial eight engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $40,000 rather than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $40,000. dollars per fire engine) PRICE (Thousands Alex 200 180 160 140 120 100 80 60 40 20 0 0 + 1 True + False 2 + 4…
9. Which of the following best explains why a price-taker firm faces a horizontal demand curve at the market equilibrium price and a price-searcher firm faces a downward-sloping demand curve? a. A price-taker firm will lose all of its sales if it raises its price above the market equilibrium because it produces products that are identical to its competitors. A price-searcher firm produces a differentiated product and will lose only some sales if it raises its price. b. A price-taker firm will lose all of its sales if it lowers its price below the market equilibrium because it produces products that are identical to its competitors. A price-searcher firm produces a differentiated product and will lose only some sales if it lowers its price. c. A price-taker firm will lose all of its sales if it raises its price above the market equilibrium because it produces products that are differentiated from its competitors. A price-searcher firm produces a product that is identical to its…
3. The components of marginal revenue Manuel's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Manuel produced four fire engines, but he has decided to increase production to five fire engines. The following graph shows the demand curve Manuel faces. As you can see, to sell the additional engine, Manuel must lower his price from $105,000 to $90,000 per fire engine. Note that while Manuel gains revenue from the additional engine he sells, he also loses revenue from the initial four engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial four engines by selling at $90,000 rather than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $90,000. 150 135 Revenue Lost 120 Demand 105 Revenue Gained 90 75 60 45 30 -15 PRICE (Thousands of dollars per…
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3. The components of marginal revenue Felix's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Felix produced eight fire engines, but he has decided to increase production to nine fire engines. The following graph shows the demand curve Felix faces. As you can see, to sell the additional engine, Felix must lower his price from $75,000 to $50,000 per fire engine. Note that while Felix gains revenue from the additional engine he sells, he also loses revenue from the initial eight engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines by selling at $50,000 rather than $75,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $50,000. PRICE (Thousands of dollars per fire engine) Felix 250 225 200 175 150 125 100 75 25 0 0 1 O True 2 O…
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The market for peanut butter in Nutville ismonopolistically competitive and in long-runequilibrium. One day, consumer advocate Jif Skippydiscovers that all brands of peanut butter in Nutvilleare identical. Thereafter, the market becomes perfectlycompetitive and again reaches its long-run equilibrium.Using an appropriate diagram, explain whether eachof the following variables increases, decreases, or staysthe same for a typical firm in the market.a. priceb. quantityc. average total costd. marginal coste. profit
3. The components of marginal revenue Dmitri's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Dmitri produced four fire engines, but he has decided to increase production to five fire engines. The following graph shows the demand curve Dmitri faces. As you can see, to sell the additional engine, Dmitri must lower his price from $105,000 to $90,000 per fire engine. Note that although Dmitri gains revenue from the additional engine he sells, he also loses revenue from the initial four engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial four engines by selling at $90,000 rather than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $90,000. 150 135 Revenue Lo 120 Demand 105 80 Revenue Gained PRICE (Thousands of dollars per fe engine 228…
Darnell increase production from 7 to 8 fire engines because the dominates in this scenario. True or False: If Darnell's Fire Engines were a competitive firm instead and $175,000 were the market price for an engine, decreasing its price from $175,000 to $150,000 would result in the same change in the production quantity and, thus, total revenue. True False