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Suppose that BYOB charges $2.50 per can. Your friend Carlos 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. Complete the following table to determine whether Carlos is correct. Price Quantity Demanded (Cans) Total Revenue (Dollars) Total Cost (Dollars) Profit (Dollars) (Dollars per can) 2.50 3.00 Given the earlier information, Carlos 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. 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, topglo (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple

Suppose that BYOB charges $2.50 per can. Your friend Carlos 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. Complete the following table to determine whether Carlos is correct. Price Quantity Demanded (Cans) Total Revenue (Dollars) Total Cost (Dollars) Profit (Dollars) (Dollars per can) 2.50 3.00 Given the earlier information, Carlos 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. 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, topglo (triangle symbols) to shade in the area representing its profit. On the other hand, if BYOB is suffering a loss, use the purple

Economics: Private and Public Choice (MindTap Course List)
Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506725
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter24: Price-searcher Markets With High Entry Barriers
Section: Chapter Questions
Problem 13CQ
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Homework(Ch 15) 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. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit ATC 2.00 Loss 1.50 1.00 0.50 0 PRICE (Dollars per can) 0 MC 1.0 0.5 2.0 3.0 2.5 1.5 QUANTITY (Thousands of cans of beer) MR 3.5 D 4.0
Transcribed Image Text:Homework(Ch 15) 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. 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit ATC 2.00 Loss 1.50 1.00 0.50 0 PRICE (Dollars per can) 0 MC 1.0 0.5 2.0 3.0 2.5 1.5 QUANTITY (Thousands of cans of beer) MR 3.5 D 4.0
Suppose that BYOB charges $2.50 per can. Your friend Carlos 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. Complete the following table to determine whether Carlos is correct. Price (Dollars per can) Quantity Demanded (Cans) Total Revenue (Dollars) Total Cost (Dollars) Profit (Dollars) 2.50 3.00 Given the earlier information, Carlos 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. 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 purple ? 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit 2.00 ATC Loss 1.50 1.00 0.50 MC 0 0.5 1.0 1.5 2.0 2.5 3.0 TTY (Thusands of cans of beer) Pic Stitch PRICE (Dollars per unit) MR 3.5 D 4.0
Transcribed Image Text:Suppose that BYOB charges $2.50 per can. Your friend Carlos 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. Complete the following table to determine whether Carlos is correct. Price (Dollars per can) Quantity Demanded (Cans) Total Revenue (Dollars) Total Cost (Dollars) Profit (Dollars) 2.50 3.00 Given the earlier information, Carlos 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. 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 purple ? 4.00 3.50 Monopoly Outcome 3.00 2.50 Profit 2.00 ATC Loss 1.50 1.00 0.50 MC 0 0.5 1.0 1.5 2.0 2.5 3.0 TTY (Thusands of cans of beer) Pic Stitch PRICE (Dollars per unit) MR 3.5 D 4.0
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