3. The components of marginal revenueKarim's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Karim initially produced eight trucks, but thendecided to increase production to nine trucks. The following graph gives the demand curve faced by Karim's HookNLadder. As the graph shows, inorder to sell the additional fire truck, Karim must lower the price from $80,000 to $40,000 per truck. Notice that Karim gains revenue from the sale ofthe 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 ratherthan $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)2202001801601401201008060402000+1+2++4567QUANTITY (Fire engines)38Demand910Revenue LostRevenue Gained Karim00+1True2O False3 4 5 6 7 8QUANTITY (Fire engines)9 10increase production from 8 to 9 fire engines because theTrue or False: If alternatively Karim's HookNLadder were a competitive firm and $80,000 were the market price for an engine, increasing productionwould not affect the price at which the company is able to sell engines.dominates in this scenario.

A perfectly competitive market has a large no of sellers and hence none of the seller has the power…

Karim O True increase production from 8 to 9 fire engines because the True or False: If alternatively Karim'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 False dominates in this scenario.

Karim O True increase production from 8 to 9 fire engines because the True or False: If alternatively Karim'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 False dominates in this scenario.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter14: Firms In Competitive Markets

Section: Chapter Questions

Problem 10PA

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