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. PRICE AND COST (Dollars per can) 4.00 T 8 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0 MC 0 ATC MR 0.5 1.0 1.5 2.0 2.5 QUANTITY (Thousands of cans of beer) D 3.0 3.5 4.0 *+ Monopoly Outcome Profit Loss (?) Suppose that BYOB charges $2.00 per can. Your friend Rajiv 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 Ratix is correct
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. PRICE AND COST (Dollars per can) 4.00 T 8 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0 MC 0 ATC MR 0.5 1.0 1.5 2.0 2.5 QUANTITY (Thousands of cans of beer) D 3.0 3.5 4.0 *+ Monopoly Outcome Profit Loss (?) Suppose that BYOB charges $2.00 per can. Your friend Rajiv 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 Ratix is correct
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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 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.
(?)
PRICE AND COST (Dollars per can)
4,00
3.50
3.00
2.50
2.00
1.50
1.00 +
MC
0.50 +
0
0
ATC
0.5
1.0
1.5
2.0
2.5
QUANTITY (Thousands of cans of beer)
MR
Price
(Dollars per can)
2.00
2.25
D
3.0 3.5 4.0
*+
Monopoly Outcome
Suppose that BYOB charges $2.00 per can. Your friend Rajiv 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.
Profit
Complete the following table to determine whether Rajiv is correct.
(Cans)
Loss
Given the earlier information, Rajiv
$2.25 per can.
Quantity Demanded Total Revenue Total Cost
(Dollars)
(Dollars)
Profit
(Dollars)
Y correct in his assertion that BYOB should charge
Transcribed Image Text:Given the earlier information, Rajiv
$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 AND COST (Dollars per unit)
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 area representing the loss.
4.00
3.50
3.00
2.50
2.00
1.50
2.25
1.00
0,50
0
MC
0
1,5
ATC
MR
0.6
1,0
2.0
2.5
QUANTITY (Thousands of cans of beer)
D
3.0
correct in his assertion that BYOB should charge
3.5
4.0
Monopoly Outcome
Profit
Loss
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