### Monopolist Beer Production in Hopsville**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.#### Graph Explanation**Graph Components:**1. **Marginal Cost (MC) Curve**: Represents the cost to produce an additional can of beer.2. **Marginal Revenue (MR) Curve**: Depicts the additional revenue from selling one more can of beer.3. **Average Total Cost (ATC) Curve**: Shows the average cost per can when all costs are considered.4. **Demand (D) Curve**: Indicates the relationship between the price and quantity demanded by consumers.**Axes:**- **Horizontal Axis (Quantity)**: Represents the number of cans of beer.- **Vertical Axis (Price)**: Represents the price per can in dollars.#### Instructions for Analysis1. **Profit Maximization**: - **Black Point (Plus Symbol)**: Identify and place the black point on the graph to indicate the profit-maximizing price and quantity for BYOB. - To maximize profit, locate where the MC and MR curves intersect and then extend a vertical line to the demand curve (D).2. **Profit Representation**: - **Green Rectangle (Triangle Symbols)**: Shade the area representing the firm's profit if BYOB is making a profit. - The profit area is found between the price level (set above ATC) and the ATC curve, from the origin to the profit-maximizing quantity.3. **Loss Representation**: - **Purple Rectangle (Diamond Symbols)**: Shade the area representing the firm's loss if BYOB is suffering a loss. - The loss area is found between the ATC level (above price) and the price line, from the origin to the loss quantity.The graph allows you to visualize how these economic principles apply within a monopolistic framework, aiding in understanding how monopolists determine pricing and output levels to either maximize profits or minimize losses. **Pricing Strategy and Cost Analysis for BYOB**Suppose that BYOB charges $2.75 per can. Your friend Carlos says that since BYOB is a monopoly with market power, it should charge a higher price of $3.00 per can because this will increase BYOB's profit.**Complete the following table to determine whether Carlos is correct:**| Price (Dollars per can) | Quantity Demanded (Cans) | Total Revenue (Dollars) | Total Cost (Dollars) | Profit (Dollars) ||--------------------------|-----------------------------|---------------------------|----------------------|-----------------|| 2.75 | | | | || 3.00 | | | | |**Given the earlier information, Carlos ________ correct in his assertion that BYOB should charge $3.00 per can.**---**Technological Innovation Impact:**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.**Graphical Analysis:**- **Instructions:** - 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 triangle to shade in the area representing the loss.**Graph Description:**- The graph (not shown in this document) illustrates the effects of a technological innovation on the cost structures for BYOB.- The x-axis typically represents the quantity of cans.- The y-axis typically represents the price, cost, and revenue.- The Marginal Cost (MC) curve would generally intersect with the Average Total Cost (ATC) curve at its minimum point after the innovation.- The new equilibrium, showing the profit-maximizing price and quantity, will need to be determined with these new cost curves in place.---By understanding both the potential pricing strategies and the impact of technological innovations on costs, one can grasp how monopolies like BYOB make decisions to maximize profit.

An person, organization, or corporation that dominates and controls the market for a particular…

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 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 area representing its loss. 4.00 Esc 3.50 + PRICE (Dollars per can) 3.00 2.50 + 78°F Sunny 2.00 1.50 1.00 0.50 F1 MC F2 Ö- ATC F3 Q+ F4 - F5 Monopoly Outcome Profit F6 Loss OL i F7 ? 1 F8 P F9 F10 F11 FA F12

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 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 area representing its loss. 4.00 Esc 3.50 + PRICE (Dollars per can) 3.00 2.50 + 78°F Sunny 2.00 1.50 1.00 0.50 F1 MC F2 Ö- ATC F3 Q+ F4 - F5 Monopoly Outcome Profit F6 Loss OL i F7 ? 1 F8 P F9 F10 F11 FA F12

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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 BYOB. IF BYOB is making a profit, use the green rectangle (triangie 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 Outoome 3.00 ATC 2.50 Profit 2.00 1.50 Los MC 1.00 0.50 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 can)
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Profit maximization and loss minimization 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 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 area representing its loss. Suppose that BYOB charges $2.75 per can. Your friend Rajiv says that since BYOB is a monopoly with market power, it should charge a higher price of $3.00 per can because this will increase BYOB’s profit. Complete the…