's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina, Karim initially produced five trucks, but then ed to increase production to six trucks. The following graph gives the demand curve faced by Karim's HookNLadder. As the graph shows, in order the additional fire truck, Karim must lower the price from $60,000 to $40,000 per truck. Notice that Karim gains revenue from the sale of the ional engine, but at the same time, he loses revenue from the initial five engines because they are all sold at the lower price. the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $40,000 rather $60,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at 000. A28288 289 R 200 100 PRICE ( 100 140 120 100 Demand A A ΔΔ .. QUANTITY (Fire engines) N Revenue Lost Revenue Gained C
's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina, Karim initially produced five trucks, but then ed to increase production to six trucks. The following graph gives the demand curve faced by Karim's HookNLadder. As the graph shows, in order the additional fire truck, Karim must lower the price from $60,000 to $40,000 per truck. Notice that Karim gains revenue from the sale of the ional engine, but at the same time, he loses revenue from the initial five engines because they are all sold at the lower price. the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial five engines by selling at $40,000 rather $60,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at 000. A28288 289 R 200 100 PRICE ( 100 140 120 100 Demand A A ΔΔ .. QUANTITY (Fire engines) N Revenue Lost Revenue Gained C
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![Karim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Karim initially produced five trucks, but then
decided to increase production to six trucks. The following graph gives the demand curve faced by Karim's HookNLadder. As the graph shows, in order
to sell the additional fire truck, Karim must lower the price from $60,000 to $40,000 per truck. Notice that Karim gains revenue from the sale of the
additional engine, 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 $40,000 rather
than $60,000. 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)
A 82 8288 289 RO
220
200
100
100
140
120
100
Demand
3 A
A A
ΔΔ
0
5
QUANTITY (Fire engines)
Revenue Lost
Revenue Gained](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd71ab743-a799-47de-97de-831ff8bad87d%2F9a918924-7990-4aa2-88f5-44be26f50f46%2F7tyby1i_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Karim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Karim initially produced five trucks, but then
decided to increase production to six trucks. The following graph gives the demand curve faced by Karim's HookNLadder. As the graph shows, in order
to sell the additional fire truck, Karim must lower the price from $60,000 to $40,000 per truck. Notice that Karim gains revenue from the sale of the
additional engine, 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 $40,000 rather
than $60,000. 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)
A 82 8288 289 RO
220
200
100
100
140
120
100
Demand
3 A
A A
ΔΔ
0
5
QUANTITY (Fire engines)
Revenue Lost
Revenue Gained
![Karim should not increase production from 5 to 6 fire engines because the price effect
True or False: If alternatively Karim's Hook NLadder were a competitive firm and $60,000 were the market price for an engine, decreasing its price
from $60,000 to $40,000 would result in the same change in the production quantity and, thus, total revenue.
O True
False
dominates in this scenario.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd71ab743-a799-47de-97de-831ff8bad87d%2F9a918924-7990-4aa2-88f5-44be26f50f46%2Frjdama9_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Karim should not increase production from 5 to 6 fire engines because the price effect
True or False: If alternatively Karim's Hook NLadder were a competitive firm and $60,000 were the market price for an engine, decreasing its price
from $60,000 to $40,000 would result in the same change in the production quantity and, thus, total revenue.
O True
False
dominates in this scenario.
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