[ R P CENGAGE | MINDTAP Q s b4 Homework (Ch 08) Back to Assignment Attempts Keep the Highest / 4 m @ > 3. 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. (U On the following graph, place the black point (plus symbol) to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making & profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. If BYOB s suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing its loss. 8 Monepely Quicome = : E ATC Profit 5 2 2 - E B B Loss g g 2 s 2 : o h MR o QUANTITY OF QUTPUT (Thousands of cans of beer) v Dashboard - Antelope Valley Cc x | Homework (Ch 08) MindTap - Cengage Learning X C 26 ng.cengage.com/staticb/ui/evo/index.html?deploymentld=5839622340537210505082758348&eISBN=9781337111560&id=19959452268snapshotld=3812144& CENGAGE | MINDTAP Q Search this course ? Homework (Ch 08) X Suppose that BYOB charges $2.50 per can. Your friend Darnell says that since BYOB is a monopoly with market power, it should charge a higher price A-Z E of $3.00 per can because this will increase BYOB's profit. E Complete the following table to determine whether Darnell is correct. (Hint: If BYOB is suffering a loss, enter a negative value for profit.) Price Quantity Demanded Total Revenue Total Cost Profit (Dollars per can) (Cans) Dollars) (Dollars) (Dollars) 2.50 bongo 3.00 Given the earlier information, Darnell correct in his assertion that BYOB should charge $3.00 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. A+ On the following graph, place the black point (plus symbol) to indicate the profit-maximizing price and quantity for BYOB. If BYOB is making a profit, C use the green rectangle (triangle symbols) to shade in the area representing its profit. If BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing the loss. ?) 4.0 3.50 Monopoly Outcome 3.00 UNIT (Dollars per unit) 2.50 Profit 2.00v Dashboard - Antelope Valley Cc x | Homework (Ch 08) MindTap - Cengage Learning X C 20 ng.cengage.com/staticb/ui/evo/index.html?deploymentld=5839622340537210505082758348&eISBN=9781337111560&id=19959452268snapshotld=3812144& ? > > CENGAGE | MINDTAP Q Search this course Homework (Ch 08) X Given the earlier information, Darnell correct in his assertion that BYOB should charge $3.00 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 A-Z E the following graph. Specifically, the technological innovation causes a decrease in average fixed costs, thereby lowering the ATC curve and moving the MC curve. On the following graph, place the black point (plus symbol) 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. If BYOB is suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing the loss. ? bongo 4.0 3.50 Monopoly Outcome 3.00 2.50 At Profit PRICE AND COST PER UNIT (Dollars per unit) 2.00 ATC C+ 1.50 Loss 1.00 0.50 MC 0.5 2.5 3.0 3.5 4.0 QUANTITY OF OUTPUT (Thousands of cans of beer) Grade It Now Save & Continue Continue without savingWhen P = 2-5 Quantity Demanded = 1 15 x 1500 = 1500 TR = P x 8 = 215 x 1560 = $3750. We know, under Monopoly, the equilibrium is given by : MR = MC At 8 = 1500 P = 2.5 and ATC = 2. 75 . . We know . ATC = TC T C = ATC X Q . TC = 2.75 x 1500 = $4125 Profit ( 71 )= TR - TC = 3750- 4125 2) 1 = - 375 .Again, if P= 3 Juantity demanded = 1 x 1000 = 1080 TR = 3 x 1000 = /x 8 = $ 3080. TC = ATC X 8 = 3.75 x 1080 = $3750 Profit ( TT ) = TR - TC 2 3080 - 3750 . 2 ) 71 = - 750 Hence , Price is raised , then the Monopolist from's losses also increases forom 375 to 750 . Damnell is NOT Correct in his assertion .For the and diagram, you can see es " at point E. where MR = MC , at & = 1.75 x 1000 = 1750. 2. 25 -and ATC ? . 2. 71 2 TR - TC = Px8 - ATC x 8.. 2 ) 11. = ( 2 , 25 X 1750 ) - ( 2 x 1750 ) . 393.7.5 - 3560 . 2 ) 437 . 5 70 7 Positive lofts:W R, cost ($ ) losses . 3.5 ToS MR DEP = AB O 0.5 1 1-5 2 2.5 3 315 4 Output (in 1060 ) When P = 2- 5 Quantity Demanded = 1:5 x 1600 = 1500 7 R = P + 8 = 215 x 1560 = $3750. We know, under Monopoly, the equilibrium is given by . MR = MC At 8 = 1500 ,P = 2.5. and ATC = 2.75. . We know ATC = TC T C = AT C * Q g 1 7C = 2. 75 x 1500 = $4125 Profit ( 1 )= TR -TC = 3750- 4125 2 17 2 - 375