Economics, Student Value Edition (7th Edition)
7th Edition
ISBN: 9780134739229
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 10, Problem 10.4.9PA
To determine
The application of the concept: failing to ignore sunk cost.
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Imagine that you run the toll authority for a city bridge. You must charge all of your customers the exact same toll. Initially, you have set the price at
$2 per trip. The following graph shows the daily demand curve for trips across the city bridge.
On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the total daily expenditure when the toll is $2 on
the graph.
Note: Select and drag the rectangles from the palette to the graph. To resize, select one of the points on the rectangle and move to the desired
position. Once drawn, select inside the rectangle to see its area.
TOLL (Dollars per vehicle)
10
9
8
2
1
0
Demand
01
2 3 4 5 6 7 8 9
QUANTITY (Thousands of vehicles per day)
10
When the toll is $2, total expenditure is $
An advisor has suggested that if you raise the toll to $3, total expenditure on tolls will rise.
Total Expenditure at $2
per da
Total Expenditure at $3
On the previous graph, use the green rectangle (triangle symbols) to…
Imagine that you run the toll authority for a city bridge. You must charge all of your customers the exact same toll. Initially, you have set the price at
$2 per trip. The blue line on the following graph shows the weekly demand curve for trips across the city bridge.
On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the total weekly revenue when the toll is $2 on
the graph. Notice that when you click on the rectangle, the area is displayed.
TOLL (Dollars per vehide)
10
9
8 Demand
3
2
1
0
0
4 8 12 16 20 24 28 32
QUANTITY (Thousands of vehicles per week)
36
When the toll is $2, total revenue is $
40
TR at $2
TR at $3
(?)
An advisor has suggested that if you raise the toll to $3, the toll authority would bring in more revenue. To analyze this, use the green rectangle
(triangle symbols) to shade the area representing the total weekly revenue when the toll is $3 on the graph.
per week, but when the toll is $3, total revenue is $
per week.…
Imagine that you run the toll authority for a city bridge. You must charge all of your customers the exact same toll. Initially, you have set the price at
$2 per trip. The blue line on the following graph shows the weekly demand curve for trips across the city bridge.
On the following graph, use the purple rectangle (diamond symbols) to shade the area representing the total weekly revenue when the toll is $2 on
the graph. Notice that when you click on the rectangle, the area is displayed.
(?
10
TR at $2
8
Demand
7
TR at $3
5
2
1
8
12
16
20
24
28
32
38 40
QUANTITY (Thousands of vehicles per week)
An advisor has suggested that
you raise the toll to $3, the toll authority would bring in more revenue. To analyze this, use the green rectangle
(triangle symbols) to shade the area representing the total weekly revenue when the toll is $3 on the graph.
When the toll is $2, total revenue is S
per week, but when the toll is $3, total revenue is $
per week.
Based on your analysis, you can…
Chapter 10 Solutions
Economics, Student Value Edition (7th Edition)
Ch. 10.A - Prob. 1RQCh. 10.A - Prob. 2RQCh. 10.A - Prob. 3RQCh. 10.A - Prob. 4PACh. 10.A - Prob. 5PACh. 10.A - Prob. 6PACh. 10.A - Prob. 7PACh. 10.A - Prob. 8PACh. 10.A - Prob. 9PACh. 10.A - Prob. 10PA
Ch. 10.A - Prob. 11PACh. 10.A - Prob. 12PACh. 10.A - Prob. 12PACh. 10 - Prob. 10.1.1RQCh. 10 - Prob. 10.1.2RQCh. 10 - Prob. 10.1.3RQCh. 10 - Prob. 10.1.4RQCh. 10 - Prob. 10.1.5PACh. 10 - Prob. 10.1.6PACh. 10 - Prob. 10.1.7PACh. 10 - Prob. 10.1.8PACh. 10 - Prob. 10.1.9PACh. 10 - Prob. 10.1.10PACh. 10 - Prob. 10.1.11PACh. 10 - Prob. 10.1.12PACh. 10 - Prob. 10.2.1RQCh. 10 - Prob. 10.2.2RQCh. 10 - Prob. 10.2.3RQCh. 10 - Prob. 10.2.4PACh. 10 - Prob. 10.2.5PACh. 10 - Prob. 10.2.6PACh. 10 - Prob. 10.2.7PACh. 10 - Prob. 10.2.8PACh. 10 - Prob. 10.2.9PACh. 10 - Prob. 10.2.10PACh. 10 - Prob. 10.2.11PACh. 10 - Prob. 10.3.1RQCh. 10 - Prob. 10.3.2RQCh. 10 - Prob. 10.3.3RQCh. 10 - Prob. 10.3.4PACh. 10 - Prob. 10.3.5PACh. 10 - Prob. 10.3.6PACh. 10 - Prob. 10.3.7PACh. 10 - Prob. 10.3.8PACh. 10 - Prob. 10.3.9PACh. 10 - Prob. 10.4.1RQCh. 10 - Prob. 10.4.2RQCh. 10 - Prob. 10.4.3RQCh. 10 - Prob. 10.4.4RQCh. 10 - Prob. 10.4.5PACh. 10 - Prob. 10.4.6PACh. 10 - Prob. 10.4.7PACh. 10 - Prob. 10.4.8PACh. 10 - Prob. 10.4.9PACh. 10 - Prob. 10.4.10PACh. 10 - Prob. 10.4.11PACh. 10 - Prob. 10.4.12PACh. 10 - Prob. 10.4.13PACh. 10 - Prob. 10.4.14PACh. 10 - Prob. 10.4.15PACh. 10 - Prob. 10.4.16PACh. 10 - Prob. 10.1CTECh. 10 - Prob. 10.2CTECh. 10 - Prob. 10.3CTE
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