1 . Profit maximization and loss minimization

Lagatt Green is a monopoly beer producer and distributor operating in the hypothetical economy of Lightington. Assume that Lagatt Green is not able price discriminate, and so it sells its beer 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 Lagatt Green faces for beer in Lightington.

Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for Lagatt Green. If Lagatt Green is making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if Lagatt Green 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 2.00 PRICE (Dollars per unit) Loss 1.50 ATC 1.00 0.50 MC D MR 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 QUANTITY (Thousands of bottles of beer)4.00 + 3.50 Monopoly Outcome 3.00 2.50 Profit ATC 2.00 PRICE (Dollars per bottle) 1.50 Loss 1.00 MC 0.50 MR D 0 0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 QUANTITY (Thousands of bottles of beer)