PRICE (Thousands of dollars per fire engine) 10 110 100 3. The components of marginal revenue Revenue Lost Demand 80 70 50 40 0 ° 2 3 4 5 6 7 8 10 QUANTITY (Fire engines) Revenue Gained Femi's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Femi initially produced eight trucks, but then decided to increase production to nine trucks. The following graph gives the demand curve faced by Femi's HookNLadder. As the graph shows, in order to sell the additional fire truck, Femi must lower the price from $80,000 to $60,000 per truck. Notice that Femi gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial eight 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 eight engines by selling at $60,000 rather than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $60,000. Femi increase production from 8 to 9 fire engines because the dominates in this scenario. True or False: If alternatively Femi's HookNLadder were a competitive firm and $80,000 were the market price for an engine, increasing production would not affect the price at which the company is able to sell engines. O True False
PRICE (Thousands of dollars per fire engine) 10 110 100 3. The components of marginal revenue Revenue Lost Demand 80 70 50 40 0 ° 2 3 4 5 6 7 8 10 QUANTITY (Fire engines) Revenue Gained Femi's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Femi initially produced eight trucks, but then decided to increase production to nine trucks. The following graph gives the demand curve faced by Femi's HookNLadder. As the graph shows, in order to sell the additional fire truck, Femi must lower the price from $80,000 to $60,000 per truck. Notice that Femi gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial eight 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 eight engines by selling at $60,000 rather than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $60,000. Femi increase production from 8 to 9 fire engines because the dominates in this scenario. True or False: If alternatively Femi's HookNLadder were a competitive firm and $80,000 were the market price for an engine, increasing production would not affect the price at which the company is able to sell engines. O True False
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter14: Monopoly
Section: Chapter Questions
Problem 3PA
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please answer in text form and in proper format answer with must explanation , calculation for each part and steps clearly
Transcribed Image Text:PRICE (Thousands of dollars per fire engine)
10
110
100
3. The components of marginal revenue
Revenue Lost
Demand
80
70
50
40
0
°
2
3
4 5 6 7
8
10
QUANTITY (Fire engines)
Revenue Gained
Femi's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Femi initially produced eight trucks, but then
decided to increase production to nine trucks. The following graph gives the demand curve faced by Femi's HookNLadder. As the graph shows, in order
to sell the additional fire truck, Femi must lower the price from $80,000 to $60,000 per truck. Notice that Femi gains revenue from the sale of the
additional engine, but at the same time, he loses revenue from the initial eight 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 eight engines by selling at $60,000 rather
than $80,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at
$60,000.
Femi
increase production from 8 to 9 fire engines because the
dominates in this scenario.
True or False: If alternatively Femi's HookNLadder were a competitive firm and $80,000 were the market price for an engine, increasing production
would not affect the price at which the company is able to sell engines.
O True
False
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