3. The components of marginal revenueMo's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Mo initially produced five trucks, but then decided toincrease production to six trucks. The following graph gives the demand curve faced by Mo's HookNLadder. As the graph shows, in order to sell theadditional fire truck, Mo must lower the price from $160,000 to $120,000 per truck. Notice that Mo gains revenue from the sale of the additionalengine, but at the same time, he loses revenue from the initial five 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 five engines by selling at $120,000 ratherthan $160,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engineat $120,000.PRICE (Thousands of dollars per fire engine)220200180160140120100806040200012Demand3 4567QUANTITY (Fire engines)89 10Revenue LostRevenue Gained(?) Moincrease production from 5O TrueO False6 fire engines because thedominates in this scenario.True or False: If alternatively Mo's HookNLadder were a competitive firm and $160,000 were the market price for an engine, decreasing its price from$160,000 to $120,000 would result in a decrease in the production quantity, but an increase in total revenue.

The trucks were sold at $160000 and the price got reduced to $120000. A reduction in price would…

Mo increase production from 5 to 6 fire engines because the O True O False dominates in this scenario. True or False: If alternatively Mo's HookNLadder were a competitive firm and $160,000 were the market price for an engine, decreasing its price from $160,000 to $120,000 would result in a decrease in the production quantity, but an increase in total revenue.

Mo increase production from 5 to 6 fire engines because the O True O False dominates in this scenario. True or False: If alternatively Mo's HookNLadder were a competitive firm and $160,000 were the market price for an engine, decreasing its price from $160,000 to $120,000 would result in a decrease in the production quantity, but an increase in 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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