4. Profit maximization and loss minimization Fire Dragon Co. is a hot sauce producer and distributor operating a monopoly in Heatopia. Assume that Fire Dragon is not able price discriminate, and so it sells its hot sauce to all customers at the same price per bottle. The following graph gives the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) curves that Fire Dragon faces for hot sauce in Heatopia. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for Fire Dragon. If Fire Dragon is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if Fire Dragon is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. PRICE (Dollars per bottle) 4.00 3.50 3.00 2.50 ATC 2.00 1.50 1.00 0.50 MC 0 0 0.5 MR 1.0 1.5 2.0 2.5 D 3.0 3.5 4.0 QUANTITY (Thousands of bottles of hot sauce) + Monopoly Outcome Profit Loss ? Suppose Fire Dragon charges $2.00 per bottle. Your classmate Jeremiah says that because Fire Dragon is a monopoly with market power, it should charge the higher price of $2.25 per bottle in order to increase its profit. Complete the following table to determine whether Jeremiah is correct. Price Quantity Demanded (Dollars per bottle) (Cans) 2.00 2.25 Given the earlier information, Jeremiah Total Revenue (Dollars) Total Cost (Dollars) Profit (Dollars) correct in his assertion that Fire Dragon should charge $2.25 per bottle. Suppose that a technological innovation decreases Fire Dragon's costs so that it now faces the marginal cost (MC) and average total cost (ATC) given on the following graph. Specifically, the technological innovation causes a decrease in average fixed costs, thereby lowering the ATC curve and moving the MC curve. Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for Fire Dragon. If Fire Dragon is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if Fire Dragon is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing the loss. PRICE (Dollars per unit) 4.00 3.50 3.00 2.50 2.00 1.50 ATC 1.00 0.50 MC 0 0 0.5 MR 1.0 1.5 2.0 2.5 D 3.0 3.5 4.0 QUANTITY (Thousands of bottles of hot sauce) Monopoly Outcome Profit Loss ?