3. The components of marginal revenueAlex's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially,Alex produced six fire engines, but he has decided to increase production to seven fire engines.The following graph shows the demand curve Alex faces. As you can see, to sell the additionalengine, Alex must lower his price from $100,000 to $50,000 per fire engine. Note that while Alexgains revenue from the additional engine he sells, he also loses revenue from the initial six enginebecause he sells them all at the lower price.Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost fromthe initial six engines by selling at $50,000 rather than $100,000. Then use the green rectangle(triangle symbols) to shade the area representing the revenue gained from selling an additionalengine at $50,000.PRICE (Thousands of dollars per fire engine)250225200175150125100755025Alex012 3 4 5QUANTITY (Fire engines)O TrueFalse6Demand78 9 10Revenue LostRevenue Gained?increase production from 6 to 7 fire engines because thedominates in this scenario.True or False: If Alex's Fire Engines were a competitive firm instead and $100,000 were themarket price for an engine, decreasing its price from $100,000 to $50,000 would result in adecrease in the production quantity, but an increase in total revenue.

Demand curve is a downward sloping curve showing inverse relationship between price and quantity…

Alex increase production from 6 to 7 fire engines because the dominates in this scenario. True or False: If Alex's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, decreasing its price from $100,000 to $50,000 would result in a decrease in the production quantity, but an increase in total revenue. True False

Alex increase production from 6 to 7 fire engines because the dominates in this scenario. True or False: If Alex's Fire Engines were a competitive firm instead and $100,000 were the market price for an engine, decreasing its price from $100,000 to $50,000 would result in a decrease in the production quantity, but an increase in total revenue. True False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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