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 Lost 120 Demand 105 Revenue Gained PRICE (Thousands of dollars per tre engine a 8 2 . QUANTITY (F) Dmitri increase production from 4 to 5 fire engines, because revenue gained is than revenue lost in this scenario. True or False: If Dmitri's Fire Engines were a competitive fem instead and $105,000 were the market price for an engine, decreasing its price from $105,000 to $90,000 would result in an increase in production quantity and total revenue. Tru False
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 Lost 120 Demand 105 Revenue Gained PRICE (Thousands of dollars per tre engine a 8 2 . QUANTITY (F) Dmitri increase production from 4 to 5 fire engines, because revenue gained is than revenue lost in this scenario. True or False: If Dmitri's Fire Engines were a competitive fem instead and $105,000 were the market price for an engine, decreasing its price from $105,000 to $90,000 would result in an increase in production quantity and total revenue. Tru False
Chapter1: Making Economics Decisions
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Transcribed Image Text: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 9
Я и
2
3
7
QUANTITY (Fire)
Dmitri
increase production from 4 to 5 fire engines, because revenue gained is
than revenue lost in this scenario.
True or False: If Dmitri's Fire Engines were a competitive fem instead and $105,000 were the market price for an engine, decreasing its price from
$105,000 to $90,000 would result in an increase in production quantity and total revenue.
O Trunk
O Fa
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