TimTrueincrease production from 4 to 5 fire engines because theTrue or False: If Tim's Fire Engines were a competitive firm instead and $105,000 were the market price for an engine, increasing its production wouldnot affect the price at which he can sell engines.Falsedominates in this scenario. Tim's Fire Engines is the sole seller of fire engines in the fictional country of Pyrotania. Initially, Tim produced four fire engines, but he has decided toincrease production to five fire engines. The following graph shows the demand curve Tim faces. As you can see, to sell the additional engine, Timmust lower his price from $105,000 to $90,000 per fire engine. Note that while Tim gains revenue from the additional engine he sells, he also losesrevenue 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 ratherthan $105,000. Then use the green rectangle (triangle symbols) to shade the area representing the revenue gained from selling an additional engineat $90,000.PRICE (Thousands of dollars per fire engine)15013512010590756045301500123Demand+4567QUANTITY (Fire engines)89 10[x]Revenue LostRevenue Gained(?)

The demand curve shows an inverse relationship between price and quantity demanded. Demand is a…

Tim True increase production from 4 to 5 fire engines because the True or False: If Tim'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. False dominates in this scenario.

Tim True increase production from 4 to 5 fire engines because the True or False: If Tim'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. False dominates in this scenario.

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter8: Perfect Competition

Section: Chapter Questions

Problem 6SCQ: A firms marginal cost curve above the average variable cost curve is equal to the films individual...

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