Karim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Karim initially produced five trucks, but thendecided to increase production to six trucks. The following graph gives the demand curve faced by Karim's HookNLadder. As the graph shows, in orderto 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 theadditional 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 ratherthan $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 RO220200100100140120100Demand3 AA AΔΔ05QUANTITY (Fire engines)Revenue LostRevenue Gained Karim should not increase production from 5 to 6 fire engines because the price effectTrue or False: If alternatively Karim's Hook NLadder were a competitive firm and $60,000 were the market price for an engine, decreasing its pricefrom $60,000 to $40,000 would result in the same change in the production quantity and, thus, total revenue.O TrueFalsedominates in this scenario.

Demand curve slopes downward as it shows an inverse relationship between price and quantity…

'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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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