3. The components of marginal revenueBob's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially,Bob produced five fire engines, but he has decided to increase production to six fire engines. Thefollowing graph shows the demand curve Bob faces. As you can see, to sell the additional engine,Bob must lower his price from $160,000 to $120,000 per fire engine. Note that while Bob gainsrevenue from the additional engine he sells, he also loses revenue from the initial five enginesbecause he sells them all at the lower price.Use the purple rectangle (diamond symbols) to shade the area representing the revenue lost fromthe 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 additionalengine at $120,000.PRICE (Thousands of dollars per fire engine)200180160140120100806040200+012Bobin this scenario.TrueFalse3Demand+56 7QUANTITY (Fire engines)+89 10Revenue LostRevenue Gained(?)increase production from 5 to 6 fire engines because thedominatesTrue or False: If Bob's Fire Engines were a competitive firm instead and $160,000 were the marketprice for an engine, decreasing its price from $160,000 to $120,000 would result in the samechange in the production quantity and, thus, total revenue.

Bob in this scenario. increase production from 5 to 6 fire engines because the True False dominates True or False: If Bob's Fire Engines were a competitive firm instead 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.

Bob in this scenario. increase production from 5 to 6 fire engines because the True False dominates True or False: If Bob's Fire Engines were a competitive firm instead 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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