Suppose that BYOB charges $2.00 per can. Your friend Kevin 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 Kevin is correct. Price Quantity Demanded Total Revenue Total Cost Profit (Dollars per can) (Cans) (Dollars) (Dollars) (Dollars) 2.00 2.25 siven the earlier information, Kevin correct in his assertion that BYOB should charge $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 ollowing graph. Specifically, the technological innovation causes a decrease in average fixed costs, thereby lowering the ATC curve and moving the MC curve.

Suppose that BYOB charges $2.00 per can. Your friend Kevin 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 Kevin is correct. Price Quantity Demanded Total Revenue Total Cost Profit (Dollars per can) (Cans) (Dollars) (Dollars) (Dollars) 2.00 2.25 siven the earlier information, Kevin correct in his assertion that BYOB should charge $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 ollowing graph. Specifically, the technological innovation causes a decrease in average fixed costs, thereby lowering the ATC curve and moving the MC curve.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter20: The Problem Of Adverse Selection Moral Hazard

Section: Chapter Questions

Problem 3MC

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1 . 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.

PLEASE HELP ME

Suppose that BYOB charges $2.00 per can. Your friend Kevin 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 Kevin is correct.
Price
Quantity Demanded Total Revenue
Total Cost
Profit
(Dollars per can)
(Cans)
(Dollars)
(Dollars)
(Dollars)
2.00
2.25
Given the earlier information, Kevin
correct in his assertion that BYOB should charge $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.

(?)
4.00
3.50
Monopoly Outcome
3.00
2.50
Profit
ATC
2.00
Loss
1.50
1.00
MC
0.50
D
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)

Definition Definition Amount earned or lost on the sale of one or more items is referred to as the profit or loss on that item

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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.
PRICE (Dollars per can)
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0
MC
0
0.5
ATC
1.5
MR
D
3.0
1.0
2.0 2.5
QUANTITY (Thousands of cans of beer)
3.5
4.0
Monopoly Outcome
Profit
Loss
(?

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