Asim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Asim initially produced six trucks, but then decided to increase production to seven trucks. The following graph gives the demand curve faced by Asim's HookNLadder. As the graph shows, in order to sell the additional fire truck, Asim must lower the price from $100,000 to $50,000 per truck. Notice that Asim gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial six 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 six engines by selling at $50,000 rather than $100,000. The use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $50,000. PRICE (Thousands of dollars per fire engine) ERRES 8*8 *. 275 250 200 175 150 125 100 75 50 25 Demand 2 3 45 67 QUANTITY (Fire engines) Revenue Lost Revenue Gained

Asim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Asim initially produced six trucks, but then decided to increase production to seven trucks. The following graph gives the demand curve faced by Asim's HookNLadder. As the graph shows, in order to sell the additional fire truck, Asim must lower the price from $100,000 to $50,000 per truck. Notice that Asim gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial six 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 six engines by selling at $50,000 rather than $100,000. The use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $50,000. PRICE (Thousands of dollars per fire engine) ERRES 88 . 275 250 200 175 150 125 100 75 50 25 Demand 2 3 45 67 QUANTITY (Fire engines) 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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Concept explainers

Explicit and Implicit Cost Analysis

The entire idea of the cost of production or production cost is applied corresponding or we can say that it is related to money cost. Money cost refers to any money expenditure which the firm or supplier or producer undertakes in purchasing or hiring factors of production or factor services.

Question

3. The components of marginal revenue
Asim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Asim initially produced six trucks, but then decided
to increase production to seven trucks. The following graph gives the demand curve faced by Asim's HookNLadder. As the graph shows, in order to sell
the additional fire truck, Asim must lower the price from $100,000 to $50,000 per truck. Notice that Asim gains revenue from the sale of the
additional engine, but at the same time, he loses revenue from the initial six 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 six engines by selling at $50,000 rather
than $100,000. The use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine
at $50,000.
PRICE (Thousands of dollars per fire engine).
275
250
200
175
150
125
100
75
50
25
0
1
2
Demand
3
6
7
4 5
QUANTITY (Fire engines)
10
Revenue Lost
Revenue Gained

PRICE (Thousands of dollars per fire engine)
ER A & E 3D 8 * 2 * •
Asim
275
250
225
200
175
150
125
100
75
1
should
True
O False
2
3
Demand
4 5 6
QUANTITY (Fire engines)
6
10
increase production from 6 to 7 fire engines because the price effect dominates in this scenario.
True or False: If alternatively Asim's HookNLadder were a competitive firm 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.
Revenue Lost
Revenue Gained
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