3. The components of marginal revenue Jabari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced five trucks, but then decided to increase production to six trucks. The following graph gives the demand curve faced by Jabari's HookNLadder. As the graph shows, in order to sell the additional fire truck. Jabari must lover the price from $160,000 to $120,000 per truck. Notice that Jabari gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial five engines because they are all sold 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) 200 180 100 140 120 100 Jabari 1 2 True Demand False 3 4 QUANTITY (Fre engines) 10 Revenue Lost Revenue Gained increase production from 5 to 6 fire engines because the True or False: If alternatively Jabari's HookNLadder were a competitive firm and $160.000 were the market price for an engine, decreasing its price from $160,000 to $120,000 would result in the same change in the production quantity and, thus, total revenue. dominates in this scenario,
3. The components of marginal revenue Jabari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced five trucks, but then decided to increase production to six trucks. The following graph gives the demand curve faced by Jabari's HookNLadder. As the graph shows, in order to sell the additional fire truck. Jabari must lover the price from $160,000 to $120,000 per truck. Notice that Jabari gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial five engines because they are all sold 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) 200 180 100 140 120 100 Jabari 1 2 True Demand False 3 4 QUANTITY (Fre engines) 10 Revenue Lost Revenue Gained increase production from 5 to 6 fire engines because the True or False: If alternatively Jabari's HookNLadder were a competitive firm and $160.000 were the market price for an engine, decreasing its price from $160,000 to $120,000 would result in the same change in the production quantity and, thus, total revenue. dominates in this scenario,
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. The components of marginal revenue
Jabar's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced five trucks, but then
decided to increase production to six trucks. The following graph gives the demand curve faced by Jabari's HookNLadder. As the graph shows, in order
to sell the additional fire truck, Jabari must lower the price from $160,000 to $120,000 per truck. Notice that Jabari gains revenue from the sale of the
additional engine, but at the same time, he loses revenue from the initial five engines because they are all sold 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
100
100
140
120
100
DO
0
Jabari
10
1
True
2
O False
Demand
3
S
QUANTITY (Fire engines)
.
.
10
Revenue Lost
Revenue Gained
increase production from 5 to 6 fire engines because the
True or False: If alternatively Jabar's HookNLadder were a competitive firm and $160.000 were the market price for an engine, decreasing its price
from $160,000 to $120,000 would result in the same change in the production quantity and, thus, total revenue.
dominates in this scenario,
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