Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 13, Problem 13.1.9PA
To determine
The output effect, price effect and the marginal revenue of the firm.
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Omari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Omari initially produced eight trucks, but then
decided to increase production to nine trucks. The following graph gives the demand curve faced by Omari's HookNLadder. As the graph shows, in
order to sell the additional fire truck, Omari must lower the price from $80,000 to $40,000 per truck. Notice that Omari 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 $40,000 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
$40,000.
PRICE (Thousands of dollars per fire engine)
220
200
180
160
140
120
100
80
60
40
20
0
Omari
0 1
+
2
3 4
5…
Omari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Omari initially produced four trucks, but then
decided to increase production to five trucks. The following graph gives the demand curve faced by Omari's HookNLadder. As the graph shows, in
order to sell the additional fire truck, Omari must lower the price from $105,000 to $90,000 per truck. Notice that Omari gains revenue from the sale
of the additional engine, but at the same time, he loses revenue from the initial four 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 four engines by selling at $90,000 rather
than $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine
at $90,000.
PRICE (Thousands of dollars per fire engine)
165
150
135
120
105
Omari
90
75
60
45
30
15
Revenue Lost
Demand…
Use the table below to answer the following questions:
Quantity
Demand (Price)
Marginal Revenue
Marginal Cost
Average Cost
1
$1200
1200
500
500
2
1100
1000
275
388
3
1000
800
225
333
4
900
600
250
313
5
800
400
400
330
6
700
200
500
358
7
600
0
700
407
What is this firm’s profit-maximizing price? What is its profit-maximizing output?
What is the firm’s average profit? What is the firm’s total profit?
If at least one consumer is willing to pay $1200 for this product, why won’t the monopolist charge $1200?
Chapter 13 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 13 - Prob. 13.1.1RQCh. 13 - Prob. 13.1.2RQCh. 13 - Prob. 13.1.3RQCh. 13 - Prob. 13.1.4PACh. 13 - Prob. 13.1.5PACh. 13 - Prob. 13.1.6PACh. 13 - Prob. 13.1.7PACh. 13 - Prob. 13.1.8PACh. 13 - Prob. 13.1.9PACh. 13 - Prob. 13.1.10PA
Ch. 13 - Prob. 13.2.1RQCh. 13 - Prob. 13.2.2RQCh. 13 - Prob. 13.2.3RQCh. 13 - Prob. 13.2.4PACh. 13 - Prob. 13.2.5PACh. 13 - Prob. 13.2.6PACh. 13 - Prob. 13.2.7PACh. 13 - Prob. 13.2.8PACh. 13 - Prob. 13.2.9PACh. 13 - Prob. 13.3.1RQCh. 13 - Prob. 13.3.2RQCh. 13 - Prob. 13.3.3RQCh. 13 - Prob. 13.3.4RQCh. 13 - Prob. 13.3.5PACh. 13 - Prob. 13.3.6PACh. 13 - Prob. 13.3.7PACh. 13 - Prob. 13.3.8PACh. 13 - Prob. 13.3.9PACh. 13 - Prob. 13.3.10PACh. 13 - Prob. 13.3.11PACh. 13 - Prob. 13.3.12PACh. 13 - Prob. 13.4.1RQCh. 13 - Prob. 13.4.2RQCh. 13 - Prob. 13.4.3RQCh. 13 - Prob. 13.4.4RQCh. 13 - Prob. 13.4.5PACh. 13 - Prob. 13.4.6PACh. 13 - Prob. 13.4.7PACh. 13 - Prob. 13.4.8PACh. 13 - Prob. 13.4.9PACh. 13 - Prob. 13.5.1RQCh. 13 - Prob. 13.5.2RQCh. 13 - Prob. 13.5.3PACh. 13 - Prob. 13.5.4PACh. 13 - Prob. 13.5.5PACh. 13 - Prob. 13.5.6PACh. 13 - Prob. 13.5.7PACh. 13 - Prob. 13.6.1RQCh. 13 - Prob. 13.6.2RQCh. 13 - Prob. 13.6.3PACh. 13 - Prob. 13.6.4PACh. 13 - Prob. 13.6.5PACh. 13 - Prob. 13.6.6PACh. 13 - Prob. 13.1CTECh. 13 - Prob. 13.2CTECh. 13 - Prob. 13.3CTE
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