Sean's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Sean produced five fire engines, but he has decidedto increase production to six fire engines. The following graph shows the demand curve Sean faces. As you can see, to sell the additional engine, Seanmust lower his price from $160,000 to $120,000 per fire engine. Note that while Sean gains revenue from the additional engine he sells, he also losesrevenue from the initial five 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 five engines by selling at $120,000 ratherthan $160,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engineat $120,000.(?200180DemandRevenue Lost160* 140120Revenue Gained1008060(Thousands of dollars per fire engine) 4020123457810QUANTITY (Fire engines)Seanincrease production from 5 to 6 fire engines because thedominates in this scenario.True or False: If Sean's Fire Engines were a competitive firm instead and $160,000 were the market price for an engine, decreasing its price from$160,000 to $120,000 would result in a decrease in the production quantity, but an increase in total revenue.TrueO FalsePRICE

Total Revenue: Total revenue is calculated by multiplying the price by the number of units sold.…

Sean increase production from 5 to 6 fire engines because the dominates in this scenario. True or False: If Sean's Fire Engines were a competitive firm instead and $160,000 were the market price for an engine, decreasing its price from $160,000 to $120,000 would result in a decrease in the production quantity, but an increase in total revenue. True O False

Sean increase production from 5 to 6 fire engines because the dominates in this scenario. True or False: If Sean's Fire Engines were a competitive firm instead and $160,000 were the market price for an engine, decreasing its price from $160,000 to $120,000 would result in a decrease in the production quantity, but an increase in total revenue. True O False

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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