3. Thè components of marginal revenue Darnell's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Darnell produced seven fire engines, but he has decided to increase production to eight fire engines. The following graph shows the demand curve Darnell faces. As you can see, to sell the additional engine, Darnell must lower his price from $175,000 to $150,000 per fire engine. Note that while Darnell gains revenue from the additional engine he sells, he also loses revenue from the initial seven 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 seven engines by selling at $150,000 rather than $175,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $150,000. 250 225 200 Revenue Lost Demand 175 150 Revenue Gained 125 100 75 60 25 10 QUANTITY (Fe engines) PRICE (Thousands of dolars per fire engine)

3. Thè components of marginal revenue Darnell's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Darnell produced seven fire engines, but he has decided to increase production to eight fire engines. The following graph shows the demand curve Darnell faces. As you can see, to sell the additional engine, Darnell must lower his price from $175,000 to $150,000 per fire engine. Note that while Darnell gains revenue from the additional engine he sells, he also loses revenue from the initial seven 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 seven engines by selling at $150,000 rather than $175,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $150,000. 250 225 200 Revenue Lost Demand 175 150 Revenue Gained 125 100 75 60 25 10 QUANTITY (Fe engines) PRICE (Thousands of dolars per fire engine)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The pen industry is an increasing cost industry. If a pen is an inferior good, and consumer's incomes permanently increase, the equilibrium price of a pen ____ in the long run, the equilibrium quantity of pens ______in the long run, and the number of firms in the market ____ in the long run. Word Bank: Decreases, Decreases, Decreases, Increases, Increases, Increases, does not change, does not change, does not change.
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…
Ch 19 Economics
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.…
ion 4 of 20 The accompanying graph depicts the marginal cost (MC), average total cost (ATC), and marginal revenue (MR) curves A Perfectly Competitive Firm for a perfectly (or purely) competitive firm. 20 19 MC Move point A to identify the profit maximizing price and 18 17 quantity for this firm. 16 15 14 ATC 13 MR = D 12 11 10 9 8 6 5 4 3 A 1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Quantity Price and Cost
35 3. The components of marginal revenue Raphael's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Raphael produced five fire engines, but he has decided to increase production to six fire engines. The following graph shows the demand curve Raphael Faces. As you can see, to sell the additional engine, Raphael must lower his price from $160,000 to $120,000 per fire engine. Note that although Raphael 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. 200 180 100 5 5 5 5 PRICE (Thousands of dollars par fra angina) 35 Domand Revenue Last 0…
2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph represents the demand curve facing a firm that can set its own prices. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per unit) 160 TOTAL REVENUE (Dol 140 120 2250 2000 1750 1500 1250 On the graph input tool, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 10, 20, 25, 30, 40, and 50 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol) to plot the results. 1000 750 500 250 0 5 10 15 20 25 30 35 40 45 50 QUANTITY (Units) 200 Demand 10 120 -40 15 30 35 QUANTITY (Number of units) 45 Graph Input Tool…
2. Calculating marginal revenue from a linear demand curve The blue curve on the following graph represents the demand curve facing a firm that can set its own prices. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Market for Goods Quantity Demanded (Units) Demand Price (Dollars per unit) On the graph input tool, change the number found in the Quantity Demanded field to determine the prices that correspond to the production of 0, 8, 16, 20, 24, 32, and 40 units of output. Calculate the total revenue for each of these production levels. Then, on the following graph, use the green points (triangle symbol) to plot the results. Calculate the total revenue if the firm produces 8 versus 7…
6. Deriving the short-run supply curve The following graph plots the marginal cost (MC) curve, average total cost (ATC) curve, and average variable cost (AVC) curve for a firm operating in the competitive market for sun lamps. 100 90 80 70 60 50 ATC 40 30 20 10 0 0 5 AVC MOD 10 15 20 25 30 35 40 45 50 QUANTITY (Thousands of lamps) For every price level given in the following table, use the graph to determine the profit-maximizing quantity of lamps for the firm. Further, select whether the firm will choose to produce, shut down, or be indifferent between the two in the short run. (Assume that when price exactly equals average variable cost, the firm is indifferent between producing zero lamps and the profit-maximizing quantity of lamps.) Lastly, determine whether the firm will earn a profit, incur a loss, or break even at each price. Price (Dollars per lamp) 10 20 32 40 50 60 Quantity (Lamps) Produce or Shut Down? Profit or Loss? On the following graph, use the orange points (square…
10. Figure 5 shows the graph of the short-run cost curves for Tim-T-Shirts, a firm operating in a perfectly competitive market. P* denotes the current price for Tim T-Shirts. Based on the information in the graph, which of the following should we expect in the long run? a) New firms will enter the market. b) The number of firms in the market will remain unchanged. c) Gray Sweaters will increase the current price of sweaters. d) There is not enough information to answer the question. Figure 5 Price and Costs P* MC ATC AVC Quantity
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