TimTrueincrease production from 4 to 5 fire engines because theTrue or False: If Tim's Fire Engines were a competitive firm instead and $105,000 were the market price for an engine, increasing its production wouldnot affect the price at which he can sell engines.Falsedominates in this scenario. Tim's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Tim produced four fire engines, but he has decided toincrease production to five fire engines. The following graph shows the demand curve Tim faces. As you can see, to sell the additional engine, Timmust lower his price from $105,000 to $90,000 per fire engine. Note that while Tim gains revenue from the additional engine he sells, he also losesrevenue from the initial four engines because he sells them all 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 ratherthan $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engineat $90,000.PRICE (Thousands of dollars per fire engine)15013512010590756045301500123Demand+4567QUANTITY (Fire engines)89 10[x]Revenue LostRevenue Gained(?)

Tim True increase production from 4 to 5 fire engines because the True or False: If Tim's Fire Engines were a competitive firm instead and $105,000 were the market price for an engine, increasing its production would not affect the price at which he can sell engines. False dominates in this scenario.

Tim True increase production from 4 to 5 fire engines because the True or False: If Tim's Fire Engines were a competitive firm instead and $105,000 were the market price for an engine, increasing its production would not affect the price at which he can sell engines. False dominates in this scenario.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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