27 22 2 The Components Of Marginal Revenue Sam S Fire Engines Is The Sole Seller Of Fire Engines In The Fictional Count 1 (43.05 KiB) Viewed 53 times
27 22 2 The Components Of Marginal Revenue Sam S Fire Engines Is The Sole Seller Of Fire Engines In The Fictional Count 2 (9.28 KiB) Viewed 53 times
27:22 2. The components of marginal revenue Sam's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Sam produced four fire engines, but he has decided to increase production to five fire engines. The following graph shows the demand curve Sam faces. As you can see, to sell the additional engine, Sam must lower his price from $105,000 to $90,000 per fire engine. Note that while Sam 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 $90,000 150 135 120 Revenue Lost Demand 105 00 Revenue Gained PRICE (Thousands of dollars per fire engine) 75 10 45 30 15 0 0 1 2 B 0 10 QUANTITY (Fire engines) Sam increase production from 4 to 5 fire engines because the dominates in this scenario
Sam increase production from 4 to 5 fire engines because the dominates in this scenario True or False: If Sam's Fire Engines were a competitive firm instead and $105,000 were the market price for an engine, increasing its production would not affect the price at which he can sell engines. True False
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