7. Price and output in a competitive price-searcher marketConsider a price-searching firm, Sean's Fire Engines, which sells fire engines in the fictional country of Pyrotania. Initially, Sean's produced eight fireengines but then decided to increase production to nine fire engines. The following graph shows the demand curve the firm faces. To sell the additionalengine, Sean's must lower its price from $80,000 to $40,000 per engine. (Hint: Sean's Fire Engines gains revenue from the additional engine it sells,but it also loses revenue from the initial eight engines because it sells them all at the lower price.)On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the revenue lost from the initial eight engines byselling at $40,000 rather than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained fromselling an additional engine at $40,000.PRICE (Thousands of dollars per fire engine)20018016014012010080604020001+2+3+7456QUANTITY (Fire engines)+8Demand++910Revenue LostRevenue Gained(?) Sean's Fire Enginesscenario.Trueincrease production from eight to nine fire engines because the change inTrue or False: If Sean's Fire Engines were a price-taking firm instead, and $80,000 were the market price for an engine, lowering its price from$80,000 to $40,000 would not result in increased revenue.Falsedominates in this

Monopoly is a market structure in which there a single seller and the monopolist has the ability to…

Sean's Fire Engines scenario. O True increase production from eight to nine fire engines because the change in True or False: If Sean's Fire Engines were a price-taking firm instead, and $80,000 were the market price for an engine, lowering its price from $80,000 to $40,000 would not result in increased revenue. False dominates in this

Sean's Fire Engines scenario. O True increase production from eight to nine fire engines because the change in True or False: If Sean's Fire Engines were a price-taking firm instead, and $80,000 were the market price for an engine, lowering its price from $80,000 to $40,000 would not result in increased revenue. False dominates in this

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In Perfect Competition, Demand shifts produce greater price adjustments andsmaller quantity adjustments in the long run than they do in the short run – Justifyyour agreement / disagreement to the statement.
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er 11 i Suppose the market for corn is a purely competitive, constant-cost industry that is in long-run equilibrium. Now assume that an increase in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price will be Multiple Choice OO O the same as the initial equilibrium price, but the new industry output will be greater than the original output. greater than the initial price, and the new industry output will be greater than the original output. less than the initial price, but the new industry output will be greater than the original output. the same as the initial equilibrium price, and the industry output will remain unchanged. 23 11,229 X OCT all Z A
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1.0 - If the demand forApple Cinnamon Cheerios decreases at all prices, what will happen to thedemand curve? Show the shift in the demand curve on the same diagram and explain what happensto the firm’s output and profits.
Where is a perfeetly competitive firm's break-even price? O at the intersection of the total cost curve with the marginal revenue curve at the minimum point of the average variable cost curve O at the intersection of the marginal cost curve with the marginal revenue curve at the minimum point of the average total cost curve at the minimum point of the marginal cost curve
Generally, when preferences for a good rise, demand for the good rises. If a perfectly competitive market starts in long-run in the industry and equilibrium, holding all else constant, this will result in a higher market price, which will lead to the market. This causes price to None of these 3 possible answers listed here are correct. economic losses; attracts new firms into; fall economic losses; causes some firms to leave; rise further O positive economic profits; causes some firms to leave; rise further
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