Mo's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Mo initially produced four trucks, but then decided to increase production to five 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 $105,000 to $90,000 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 four 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 four engines by selling at $90,000 rather than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $90,000. PRICE (Thousands of dollars per fire engine) Mo ####&##== 150 136 120 106 8 76 30 15 1 O True O False Demand 3 4 S 7 QUANTITY (Fire engines) . Revenue Lost Revenue Gained increase production from 4 to 5 fire engines because the dominates in this scenario. True or False: If alternatively Mo's HookNLadder were a competitive firm and $105,000 were the market price for an engine, decreasing its price from $105,000 to $90,000 would result in the same change in the production quantity and, thus, total revenue.
Mo's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Mo initially produced four trucks, but then decided to increase production to five 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 $105,000 to $90,000 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 four 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 four engines by selling at $90,000 rather than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $90,000. PRICE (Thousands of dollars per fire engine) Mo ####&##== 150 136 120 106 8 76 30 15 1 O True O False Demand 3 4 S 7 QUANTITY (Fire engines) . Revenue Lost Revenue Gained increase production from 4 to 5 fire engines because the dominates in this scenario. True or False: If alternatively Mo's HookNLadder were a competitive firm and $105,000 were the market price for an engine, decreasing its price from $105,000 to $90,000 would result in the same change in the production quantity and, thus, total revenue.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. The components of marginal reve
Mo's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Mo initially produced four trucks, but then decided to
increase production to five 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 $105,000 to $90,000 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 four 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 four engines by selling at $90,000 rather
than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine
at $90,000.
PRICE (Thousands of dollars per fire engine)
Mo
####&*
165
150
135
120
106
90
75
45
30
15
revenue
O True
+
False
Demand
+
3 4
7
QUANTITY (Fire engines)
Revenue Lost
Revenue Gained
increase production from 4 to 5 fire engines because the
@
True or False: If alternatively Mo's HookNLadder were a competitive firm and $105,000 were the market price for an engine, decreasing its price from
$105,000 to $90,000 would result in the same change in the production quantity and, thus, total revenue.
dominates in this scenario.
Transcribed Image Text:Mo
Tru
$10
nes because the
should
increase produc
alternatively Mo's Hc
should not 000 would result in
dominates in this scenario.
petitive firm and s
price effect
= production quant output effect ptal revenue.
the market price for an engine, dec
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