Eric's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Eric produced t

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Eric S Fire Engines Is The Sole Seller Of Fire Engines In The Fictional Country Of Pyrotania Initially Eric Produced T 1 (64.41 KiB) Viewed 29 times

Eric's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Eric produced three fire engines, but he has decided to increase production to four fire engines. The following graph shows the demand curve Eric faces. As you can see, to sell the additional engine, Eric must lower his price from $125,000 to $75,000 per fire engine. Note that while Eric gains revenue from the additional engine he sells, he also loses revenue from the initial three engines because he sells them all at the lower price. Use the purple rectangle (diamond symbols) to shade the area representing the revenue fost from the initial three engines by selling at $75,000 rather than $125,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engine at $75,000. 250 226 200 Revenue Loot STS 10 Revenue Canned Demand (autua ad nu 30 125 100 75 50 2 5 6 7 QUANTITY (Fire engines) Eric Increase production from 3 to 4 fire engines because the dominates in this scenario. True or False: If Eric's Fire Engines were a competitive firm instead and $125,000 were the market price for an engine, decreasing its price from $125,000 to $75,000 would result in the same change in the production quantity and, thus, total revenue True