Mo's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Mo initially produced eight trucks, but then decided to increase production to nine trucks. The following graph gives the demand curve faced by Mo's HookNLadder. As the graph shows, in order to sell the additional fire truck, Mo must lower the price from $80,000 to $40,000 per truck. Notice that Mo gains revenue from the sale of the 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 rather than $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) 220 200 180 160 140 120 100 Demand 80 60 40 Revenue Lost Revenue Gained ? Homev PRICE (Thousands of dollars per fire engin 180 160 Ch 15) 140 120 100 80 60 20 Demand 0 0 1 2 3 A 5 6 7 8 9 10 QUANTITY (Fire engines) Revenue Lost Revenue Gained Mo increase production from 8 to 9 fire engines because the dominates in this scenario. True or False: If alternatively Mo's HookNLadder were a competitive firm and $80,000 were the market price for an engine, decreasing its price from $80,000 to $40,000 would result in the same change in the production quantity and, thus, total revenue. O True O False
Mo's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Mo initially produced eight trucks, but then decided to increase production to nine trucks. The following graph gives the demand curve faced by Mo's HookNLadder. As the graph shows, in order to sell the additional fire truck, Mo must lower the price from $80,000 to $40,000 per truck. Notice that Mo gains revenue from the sale of the 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 rather than $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) 220 200 180 160 140 120 100 Demand 80 60 40 Revenue Lost Revenue Gained ? Homev PRICE (Thousands of dollars per fire engin 180 160 Ch 15) 140 120 100 80 60 20 Demand 0 0 1 2 3 A 5 6 7 8 9 10 QUANTITY (Fire engines) Revenue Lost Revenue Gained Mo increase production from 8 to 9 fire engines because the dominates in this scenario. True or False: If alternatively Mo's HookNLadder were a competitive firm and $80,000 were the market price for an engine, decreasing its price from $80,000 to $40,000 would result in the same change in the production quantity and, thus, total revenue. O True O False
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
100%
Transcribed Image Text:Mo's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Mo initially produced eight trucks, but then decided
to increase production to nine trucks. The following graph gives the demand curve faced by Mo's HookNLadder. As the graph shows, in order to sell the
additional fire truck, Mo must lower the price from $80,000 to $40,000 per truck. Notice that Mo gains revenue from the sale of the 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 rather
than $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)
220
200
180
160
140
120
100
Demand
80
60
40
Revenue Lost
Revenue Gained
?
Transcribed Image Text:Homev
PRICE (Thousands of dollars per fire engin
180
160
Ch 15)
140
120
100
80
60
20
Demand
0
0
1
2
3
A
5
6
7
8
9
10
QUANTITY (Fire engines)
Revenue Lost
Revenue Gained
Mo
increase production from 8 to 9 fire engines because the
dominates in this scenario.
True or False: If alternatively Mo's HookNLadder were a competitive firm and $80,000 were the market price for an engine, decreasing its price from
$80,000 to $40,000 would result in the same change in the production quantity and, thus, total revenue.
O True
O False
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education