3. The components of marginal revenue Yakov's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Yakov produced five fire engines, but he has decided to increase production to six fire engines. The following graph shows the demand curve Yakov faces. As you can see, to sell the additional engine, Yakov must lower his price from $160,000 to $120,000 per fire engine. Note that although Yakov 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 3 Demand 4 5 QUANTITY (Fire engines) 6 8 9 10 Revenue Lost Revenue Gained

3. The components of marginal revenue Yakov's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Yakov produced five fire engines, but he has decided to increase production to six fire engines. The following graph shows the demand curve Yakov faces. As you can see, to sell the additional engine, Yakov must lower his price from $160,000 to $120,000 per fire engine. Note that although Yakov 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 3 Demand 4 5 QUANTITY (Fire engines) 6 8 9 10 Revenue Lost Revenue Gained

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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