4. Profit maximization and loss minimizationBYOB 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 totalcost (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 thegreen 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.4.003.50Monopoly Outcome3.00ATC2.50Profit2.00Loss1.50MC1.000.50MR0.51.01.52.02.53.03.54.0QUANTITY (Thousands of cans of beer)Suppose that BYOB charges $2.75 per can. Your friend Brian says that since BYOB is a monopoly with market power, it should charge a higher price of$3.00 per can because this will increase BYOB's profit.PRICE (Dollars per can) PriceQuantity DemandedTotal RevenueTotal CostProfit(Dollars per can)(Cans)(Dollars)(Dollars)(Dollars)2.753,750.00 ▼3.001,0003,000.003,750.00-750.00v▼Given the earlier information, Brian is notv 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 onthe following graph. Specifically, the technological innovation causes a decrease in average fixed costs, thereby lowering the ATC curve and movingthe MC curve.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 purplerectangle (diamond symbols) to shade in the area representing the loss.4.003.50Monopoly Outcome3.002.50Profit2.00ATCLoss1.501.000.50MCMR0.51.01.52.02.53.03.54.0QUANTITY (Thousands of cans of beer)PRICE (Dollars per can)

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A monopoly is a sole producer selling a good thus having maximum market power thus acting as a price…