3. The components of marginal revenue Jabari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced seven trucks, but then decided to increase production to eight trucks. The following graph gives the demand curve faced by Jabari's HookNLadder. As the graph shows, in order to sell the additional fire truck, Jabari must lower the price from $100,000 to $50,000 per truck. Notice that Jabari gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial seven 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 seven engines by selling at $50,000 rather than $100,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $50,000. PRICE (Thousands of dollars per fire engine) 275 250 225 200 175 150 125 100 75 50 25 0 Jabari 0 OO 1 O True 2 O False 3 4 5 6 QUANTITY (Fire engines) 7 Demand 8 9 10 Revenue Lost Revenue Gained increase production from 7 to 8 fire engines because the True or False: If alternatively Jabari's HookNLadder were a competitive firm and $100,000 were the market price for an engine, decreasing its price from $100,000 to $50,000 would result in a decrease in the production quantity, but an increase in total revenue. ? dominates in this scenario.
3. The components of marginal revenue Jabari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced seven trucks, but then decided to increase production to eight trucks. The following graph gives the demand curve faced by Jabari's HookNLadder. As the graph shows, in order to sell the additional fire truck, Jabari must lower the price from $100,000 to $50,000 per truck. Notice that Jabari gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial seven 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 seven engines by selling at $50,000 rather than $100,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $50,000. PRICE (Thousands of dollars per fire engine) 275 250 225 200 175 150 125 100 75 50 25 0 Jabari 0 OO 1 O True 2 O False 3 4 5 6 QUANTITY (Fire engines) 7 Demand 8 9 10 Revenue Lost Revenue Gained increase production from 7 to 8 fire engines because the True or False: If alternatively Jabari's HookNLadder were a competitive firm and $100,000 were the market price for an engine, decreasing its price from $100,000 to $50,000 would result in a decrease in the production quantity, but an increase in total revenue. ? dominates in this scenario.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. The components of marginal revenue
Jabari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced seven trucks, but then
decided to increase production to eight trucks. The following graph gives the demand curve faced by Jabari's HookNLadder. As the graph shows, in
order to sell the additional fire truck, Jabari must lower the price from $100,000 to $50,000 per truck. Notice that Jabari gains revenue from the sale
of the additional engine, but at the same time, he loses revenue from the initial seven 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 seven engines by selling at $50,000
rather than $100,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional
engine at $50,000.
PRICE (Thousands of dollars per fire engine)
275
250
225
200
175
150
125
100
75
50
25
0
Jabari
0 1
True
2
O False
3 4 5
6
7
QUANTITY (Fire engines)
Demand
++
8
9 10
Revenue Lost
Revenue Gained
increase production from 7 to 8 fire engines because the
(?)
True or False: If alternatively Jabari's HookNLadder were a competitive firm and $100,000 were the market price for an engine, decreasing its price
from $100,000 to $50,000 would result in a decrease in the production quantity, but an increase in total revenue.
dominates in this scenario.
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