4. 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.

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PRICE (Dollars per can) 4DO 350 330 250 230 150 130 050 05 ATC 1D 15 20 25 3D QUANTITY (Thousands of cans of beer) 35 D 40 Monopoly Outcome Prot H Loss Complete the following table to determine whether Dmitri is correct. Price Quantity Demanded Total Revenue Total Cost Profit (Dollars per can) (Cans) (Dollars) (Dollars) (Dollars) _v :1 v :1 _v :1 v :1 Given the earlier information, Dmitri V correct in his assertion that BYOB should charge $3.00 per can. PRICE (Dollars per unit) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.5 \\/ 1.0 1.5 2.0 2.5 3.0 QUANTITY (Thousands of cans of beer) 3.5 D 4.0 Monopoly Outcome Prot H Loss