Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 16, Problem 16.3.6PA
To determine
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Charles's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Charles produced five fire engines, but he has
decided to increase production to six fire engines. The following graph shows the demand curve Charles faces. As you can see, to sell the additional
engine, Charles must lower his price from $160,000 to $120,000 per fire engine. Note that while Charles gains revenue from the additional engine he
sells, he also loses revenue 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 rather
than $160,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine
at $120,000.
PRICE (Thousands of dollars per fire engine)
8 8 8 8 8 8
200
180
160
140
120
100
8 8 8 8
60
20
0
1
Demand
3
4
5
6
7
QUANTITY (Fire…
Carlos's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Carlos produced four fire engines, but he has
decided to increase production to five fire engines. The following graph shows the demand curve Carlos faces. As you can see, to sell the additional
engine, Carlos must lower his price from $105,000 to $90,000 per fire engine. Note that while Carlos gains revenue from the additional engine he
sells, he also loses revenue 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 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)
150
135 -
120
106
60
45
15
0 +
Carlos
0 1
True
+
2
False
Demand
+
6
3 4 5
7
QUANTITY (Fire…
Edison's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Edison produced eight fire engines, but he has
decided to increase production to nine fire engines. The following graph shows the demand curve Edison faces. As you can see, to sell the additional
engine, Edison must lower his price from $80,000 to $60,000 per fire engine. Note that while Edison gains revenue from the additional engine he sells,
he also loses revenue from the initial eight 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 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.
100
90
PRICE (Thousands of dollars per fire engine)
8
80
70
60
50
40
30
10
0
Edison
0
1
O True
2
O False
+
6
3
4
5
7
QUANTITY (Fire…
Chapter 16 Solutions
Microeconomics (7th Edition)
Ch. 16 - What is the law of one price? What is arbitrage?Ch. 16 - Prob. 16.1.2RQCh. 16 - Prob. 16.1.3PACh. 16 - Prob. 16.1.4PACh. 16 - Prob. 16.1.5PACh. 16 - Prob. 16.1.6PACh. 16 - Prob. 16.2.1RQCh. 16 - In 2017, the Rock and Roll Hall of Fame and Museum...Ch. 16 - Prob. 16.2.3RQCh. 16 - Prob. 16.2.4PA
Ch. 16 - Lexmark charges lower prices for its printer...Ch. 16 - Prob. 16.2.6PACh. 16 - Prob. 16.2.7PACh. 16 - Prob. 16.2.8PACh. 16 - Prob. 16.2.9PACh. 16 - Prob. 16.2.10PACh. 16 - Prob. 16.2.11PACh. 16 - Prob. 16.2.12PACh. 16 - Prob. 16.2.13PACh. 16 - Prob. 16.2.14PACh. 16 - Prob. 16.2.15PACh. 16 - Prob. 16.3.1RQCh. 16 - Prob. 16.3.2RQCh. 16 - Prob. 16.3.3RQCh. 16 - Prob. 16.3.4PACh. 16 - Prob. 16.3.5PACh. 16 - Prob. 16.3.6PACh. 16 - Prob. 16.3.7PACh. 16 - Prob. 16.3.8PACh. 16 - Prob. 16.3.9PACh. 16 - Prob. 16.3.10PACh. 16 - Prob. 16.3.11PACh. 16 - Prob. 16.3.12PACh. 16 - Prob. 16.2CTECh. 16 - Prob. 16.3CTE
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