Jabari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced five trucks, but then decided to increase production to six trucks. The following graph gives the demand curve faced by Jabari's HookNLadder. As the graph shows, in order to sell the additional fire truck, Jabari must lower the price from $160,000 to $120,000 per truck. Notice that Jabari gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial five 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 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) 220 200 180 160 140 120 100 80 60 40 20 0 Jabari 0 1 O True 2 + 3 Demand + 4 5 6 QUANTITY (Fire engines) 7 8 9 10 Revenue Lost Revenue Gained increase production from 5 to 6 fire engines because the (?) dominates in this scenario. True or False: If alternatively Jabari's HookNLadder were a competitive firm and $160,000 were the market price for an engine, decreasing its price from $160,000 to $120,000 would result in a decrease in the production quantity, but an increase in total revenue.
Jabari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced five trucks, but then decided to increase production to six trucks. The following graph gives the demand curve faced by Jabari's HookNLadder. As the graph shows, in order to sell the additional fire truck, Jabari must lower the price from $160,000 to $120,000 per truck. Notice that Jabari gains revenue from the sale of the additional engine, but at the same time, he loses revenue from the initial five 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 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) 220 200 180 160 140 120 100 80 60 40 20 0 Jabari 0 1 O True 2 + 3 Demand + 4 5 6 QUANTITY (Fire engines) 7 8 9 10 Revenue Lost Revenue Gained increase production from 5 to 6 fire engines because the (?) dominates in this scenario. True or False: If alternatively Jabari's HookNLadder were a competitive firm and $160,000 were the market price for an engine, decreasing its price from $160,000 to $120,000 would result in a decrease in the production quantity, but an increase in total revenue.
Chapter8: Monopoly
Section: Chapter Questions
Problem 3SQP
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Transcribed Image Text:Jabari's HookNLadder is the only company selling fire engines in the fictional country of Alexandrina. Jabari initially produced five trucks, but then
decided to increase production to six trucks. The following graph gives the demand curve faced by Jabari's HookNLadder. As the graph shows, in order
to sell the additional fire truck, Jabari must lower the price from $160,000 to $120,000 per truck. Notice that Jabari gains revenue from the sale of the
additional engine, but at the same time, he loses revenue from the initial five 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 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)
220
200
180
160
140
120
100
80
60
40
0
Jabari
0
+
1
True
2
False
Demand
3 4 5 6
QUANTITY (Fire engines)
7
8
9
10
Revenue Lost
Revenue Gained
increase production from 5 to 6 fire engines because the
?
True or False: If alternatively Jabari's HookNLadder were a competitive firm and $160,000 were the market price for an engine, decreasing its price
from $160,000 to $120,000 would result in a decrease in the production quantity, but an increase in total revenue.
dominates in this scenario.
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