3. The components of marginal revenueKarim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Karim initially produced eight trucks, but thendecided to increase production to nine trucks. The following graph gives the demand curve faced by Karim's HookNLadder. As the graph shows, inorder to sell the additional fire truck, Karim must lower the price from $80,000 to $40,000 per truck. Notice that Karim gains revenue from the sale ofthe additional engine, but at the same time, he loses revenue from the initial eight 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 eight engines by selling at $40,000 ratherthan $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at$40,000.PRICE (Thousands of dollars per fire engine)2202001801601401201008060402000+1+2++4567QUANTITY (Fire engines)38Demand910Revenue LostRevenue Gained Karim00+1True2O False3 4 5 6 7 8QUANTITY (Fire engines)9 10increase production from 8 to 9 fire engines because theTrue or False: If alternatively Karim's HookNLadder were a competitive firm and $80,000 were the market price for an engine, increasing productionwould not affect the price at which the company is able to sell engines.dominates in this scenario.

A perfectly competitive market has a large no of sellers and hence none of the seller has the power…

Karim O True increase production from 8 to 9 fire engines because the True or False: If alternatively Karim's HookNLadder were a competitive firm and $80,000 were the market price for an engine, increasing production would not affect the price at which the company is able to sell engines. O False dominates in this scenario.

Karim O True increase production from 8 to 9 fire engines because the True or False: If alternatively Karim's HookNLadder were a competitive firm and $80,000 were the market price for an engine, increasing production would not affect the price at which the company is able to sell engines. O False dominates in this scenario.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Profit is the incentive that drives our market economy. Firms make production, pricing, andhiring decisions based on their quest for profit. But what happens when a firm discoversthat it can make dramatically higher profits by stopping production altogether? In December2000, due to wild swings in the market for electricity, Kaiser Aluminium faced just such adecision.Kaiser Aluminium had contracted with Bonneville power for all of its electricity needs andfound itself in the unique position of being an electricity consumer and, potentially, anelectricity reseller. By December 2000, Kaiser faced a difficult decision of continuing itscurrent aluminium production and profit levels, or closing the plant to dramatically increaseits profit by simply reselling its electricity.When making production decisions, firms must consider both their costs and revenues. Oneimportant concern for many firms is utility costs. In 1996, Kaiser Aluminium Corporation inSpokane, Washington, entered into a…
Assume that restaurants in aiports rent the space that they occupy and that the restaurant industry is competitive. Keeping in mind the concept of economic rent, we know that food prices will be higher at the airport restaurants than at other locations because: O airport restaurants generate larger economic profits than other restaurants at different locations. O the number of potential customers is greater at the airport locations. O the rent paid by the restaurant is higher than the rent paid at other locations. O demand for food at airports is less elastic than at other locations.
1 Mario owns a wood-fired pizza shop which imitates traditional Italian methods. She uses a unique sauce that attracts a loyal following of customers. The demand for her pizzas is q = 1650 – 250p, and her costs are TC 0.72+0.0035q. q is the number of pizzas sold per week, TC(q) is Maria's weekly total cost, and p is the price of a pizza. a) What price and output will Maria choose to maximize profits? b) Maria returns to college and asks her cousin Victor to manage her pizza business. Victor faces the same demand and cost conditions as Maria, but he decides to maximize revenue. What price and output should he choose?
2. Suppose that the market for wind chimes is a competitive market. The following graph shows the daily cost curves of a particular firm operating in this PRICE (Dollars per wind chime) 40 b) 36 32 28 24 20 16 2 8 4 0 MC 0 2 4 + 10 12 14 16 18 20 QUANTITY (Thousands of wind chimes per day) 8 market: a) In short run, at a market price of $26 per wind chime how much will firm ATC AVC 6 the market price is $26 in th quantity you obtained in question (a), indicate the area that represents firm's profit or loss in short run on the graph. c) What is this firm's shutdown price, that is the price below which it is optimal for the firm to shut down in short run? d) In the long run, all firms can enter and exit the market, and all entrants have the same costs as above. As this market makes the transition to its long-run equilibrium, will the price rise or fall? Will the quantity demanded rise or fall? Will the quantity supplied by each firm rise or fall? Explain your answers. e) Graph the…
Which of the following best explains why a firm in a competitive price-taker market must take the price determined in the market? The short-run average total costs of firms that are price takers will be constant. O If a price taker increased its price, consumers would buy from other suppliers. O Firms in a price-taker market will have to advertise in order to increase sales. There are no good substitutes for the product supplied by a firm that is a price taker.
er 11 i Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be Multiple Choice OO O the same as the initial equilibrium price, but the new industry output will be greater than the original output. greater than the initial price, and the new industry output will be greater than the original output. less than the initial price, but the new industry output will be greater than the original output. the same as the initial equilibrium price, and the industry output will remain unchanged. 23 11,229 X OCT all Z A
1.0 - If the demand forApple Cinnamon Cheerios decreases at all prices, what will happen to thedemand curve? Show the shift in the demand curve on the same diagram and explain what happensto the firm’s output and profits.
usiness EconomicsQ&A LibraryTwo firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in the industry that manufacture this product. Their marginal cost (MC) is equal to their average cost (AC) and it is constant at MC = AC = X, for both firms. Market demand is given as Q = Y – 2P (where P = price and Q = quantity). Select any value for X between [21 – 69] and any value for Y between [501 – 999]. Using this information, calculate the Industry Price, Industry Output, Industry Profit, Consumer Surplus and Deadweight Loss under each of the following models: (a) Cournot Model Two firms A and B produce an identical product (Note: Industry Output = Q). The firms have to decide how much output qA and qB (Note: qA = Firm A Output; qB = Firm B Output) they must produce since they are the only two firms in…
please answer both of the questions thank you! =)
Consider the perfectly competitive market for titanium. Assume that, regardless of how many firms are in the industry, every firm in the industry is identical and faces the marginal cost (MC), average total cost (ATC), and average variable cost (AVC) curves shown on the following graph. 18, 80 80 72 64 56 ATC 48 40 32 24 16 AVC 8 + MC O 3 12 15 18 21 24 27 30 QUANTITY OF OUTPUT (Thousands of pounds) COSTS (Dollars per pound)