Suppose Lagatt Green charges $2.50 per bottle. Your study partner Jabrill says that because Lagatt Green is a monopoly with market power, it shouldcharge the higher price of $3.00 per bottle in order to increase its profit.Complete the following table to determine whether Jabrill is correct.Price(Dollars per bottle)Quantity Demanded(Cans)Total Revenue(Dollars)2.501,5003,750.003.001,0003,000.00Given the earlier information, JabrillPRICE (Dollars per unit)Suppose that a technological innovation decreases Lagatt Green's costs so that it now faces the marginal cost (MC) and average total cost (ATC) givenon the following graph. Specifically, the technological innovation causes a decrease in average fixed costs, thereby lowering the ATC curve and movingthe MC curve.4.00Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for Lagatt Green. If Lagatt Green ismaking a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand, if Lagatt Green is sufferinga loss, use the purple rectangle (diamond symbols) to shade in the area representing the loss.?3.503.002.502.001.501.000.5000MCMR0.5ATCcorrect in his assertion that Lagatt Green should charge $3.00 per bottle.1.01.5 2.0 2.5 3.0QUANTITY (Thousands of bottles of beer)Total Cost(Dollars)3.5D4.0Profit(Dollars)Monopoly OutcomeProfitLossGrade It NowSave & ContinueContinue without saving Back to AssignmentAttempts1. Profit maximization and loss minimizationLagatt Green is a monopoly beer producer and distributor operating in the hypothetical economy of Lightington. Assume that Lagatt Green is not ableprice discriminate, and so it sells its beer to all customers at the same price per bottle. The following graph gives the marginal cost (MC), marginalrevenue (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 aprofit, 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.PRICE (Dollars per bottle)4.003.503.002.502.001.501.000.5000Keep the Highest/4MC0.51.5ATC1.02.0 2.5 3.0QUANTITY (Thousands of bottles of beer)MR3.5D4.0Monopoly OutcomeProfitLossSuppose Lagatt Green charges $2.50 per bottle. Your study partner Jabrill says that because Lagatt Green is a monopoly with market power, it shouldcharge the higher price of $3.00 per bottle in order to increase its profit.

Question

Accepted Answer

In monopoly , Profit is maximized where MR = MC MR is the marginal revenue MC = Marginal Cost Profit…