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 AND COST (Dollars per can) 4.00 T 8 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 2.0 2.5 QUANTITY (Thousands of cans of beer) D 3.0 3.5 4.0 *+ Monopoly Outcome Profit Loss (?) Suppose that BYOB charges $2.00 per can. Your friend Rajiv 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 Ratix is correct

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 AND COST (Dollars per can) 4.00 T 8 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 2.0 2.5 QUANTITY (Thousands of cans of beer) D 3.0 3.5 4.0 *+ Monopoly Outcome Profit Loss (?) Suppose that BYOB charges $2.00 per can. Your friend Rajiv 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 Ratix is correct

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter13: Between Competition And Monopoly

Section: Chapter Questions

Problem 5DQ

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