3. Profit maximization and loss minimization BYOB is a monopolist in beer production and distribution in the imaginary e

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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. 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 its loss. PRICE AND COST PER UNIT (Dollars per can) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0 MC 0 ATC MR 0.5 1.0 1.5 2.5 3.0 3.5 QUANTITY OF OUTPUT (Thousands of cans of beer) 2.0 D 4.0 + Monopoly Outcome Profit Loss (?)
Suppose that BYOB charges $2.75 per can. Your friend Sam 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 Sam is correct. (Hint: If BYOB is suffering a loss, enter a negative value for profit.) Profit (Dollars) Price (Dollars per can) 2.75 3.00 Quantity Demanded Total Revenue (Dollars) (Cans) Given the earlier information, Sam Total Cost (Dollars) 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.
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. PRICE AND COST PER UNIT (Dollars per unit) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0 MC 0 ATC MR 1.0 3.5 0.5 1.5 2.0 2.5 3.0 QUANTITY OF OUTPUT (Thousands of cans of beer) D 4.0 Monopoly Outcome Profit Loss ?