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BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for beer in this market. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYO8. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit ATC 2.00 1.50 Loss 1.00 MC 0.50 MR 1.0 1.5 20 Suppose that BYOB charges $2.00 per can. Your friend Lorenzo says that since BYOB is a monopoly with market power, it should charge a higher price of $2.25 per can because this will increase BYOB's profit. Complete the following table to determine whether Lorenzo is correct. Quantity Demanded (Cans) Price Total Revenue Total Cost Profit (Dollars per can) (Dollars) (Dollars) (Dollars) 2.00 2.25 Given the earlier information, Lorenzo correct in his assertion that BYO8 should charge $2.25 per can. PRICE (Dollars per can)

BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for beer in this market. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYO8. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit ATC 2.00 1.50 Loss 1.00 MC 0.50 MR 1.0 1.5 20 Suppose that BYOB charges $2.00 per can. Your friend Lorenzo says that since BYOB is a monopoly with market power, it should charge a higher price of $2.25 per can because this will increase BYOB's profit. Complete the following table to determine whether Lorenzo is correct. Quantity Demanded (Cans) Price Total Revenue Total Cost Profit (Dollars per can) (Dollars) (Dollars) (Dollars) 2.00 2.25 Given the earlier information, Lorenzo correct in his assertion that BYO8 should charge $2.25 per can. PRICE (Dollars per can)

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 30P: A company manufacturers a product in the United States and sells it in England. The unit cost of...
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Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the ares representing the loss. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit 2.00 1.50 Los ATC 1.00 0.50 MC D MR 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 QUANTITY (Thousands of cans of beer) PRICE (Dollars per unit)
Transcribed Image Text:Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the ares representing the loss. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit 2.00 1.50 Los ATC 1.00 0.50 MC D MR 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 QUANTITY (Thousands of cans of beer) PRICE (Dollars per unit)
BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for beer in this market. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYO8. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. 4.00 3.50 Monopoly Outcome 3.00 2.60 Profit ATC 2.00 1.50 Loss 1.00 MC 0.50 MR 0.5 1.0 1.5 2.0 25 3.0 3.5 4.0 Suppose that BYOB charges $2.00 per can. Your friend Lorenzo says that since BYOB is a monopoly with market power, it should charge a higher price of $2.25 per can because this will increase BYOB's profit. Complete the following table to determine whether Lorenzo is correct. Price Quantity Demanded Total Revenue Total Cost Profit (Dollars per can) (Cans) (Dollars) (Dollars) (Dollars) 2.00 2.25 Given the earlier information, Lorenzo correct in his assertion that BYOB should charge $2.25 per can. Suppose that a technological innovation decreases BYOB'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. PRICE (Dollars per can)
Transcribed Image Text:BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Suppose that BYOB cannot price discriminate; that is, it sells its beer at the same price per can to all customers. The following graph shows the marginal cost (MC), marginal revenue (MR), average total cost (ATC), and demand (D) for beer in this market. Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for BYO8. If BYOB is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. 4.00 3.50 Monopoly Outcome 3.00 2.60 Profit ATC 2.00 1.50 Loss 1.00 MC 0.50 MR 0.5 1.0 1.5 2.0 25 3.0 3.5 4.0 Suppose that BYOB charges $2.00 per can. Your friend Lorenzo says that since BYOB is a monopoly with market power, it should charge a higher price of $2.25 per can because this will increase BYOB's profit. Complete the following table to determine whether Lorenzo is correct. Price Quantity Demanded Total Revenue Total Cost Profit (Dollars per can) (Cans) (Dollars) (Dollars) (Dollars) 2.00 2.25 Given the earlier information, Lorenzo correct in his assertion that BYOB should charge $2.25 per can. Suppose that a technological innovation decreases BYOB'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. PRICE (Dollars per can)
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