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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 3.50 + 3.00 2.50 2.00 1.50 1.00 0.50 0 MC 0 S 1 11 || i I I ATC 0.5 1.0 1.5 20 2.5 QUANTITY (Thousands of cans of beer) MR Price (Dollars per can) 2.50 3.00 3.0 3.5 (Cans) D 1,250 1,000 4.0 Suppose that BYOB charges $2.50 per can. Your friend Kevin 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 Kevin is correct. Quantity Demanded Monopoly Outcome Given the earlier information, Kevin is not $3.00 per can. Profit V Loss Total Revenue Total Cost (Dollars) (Dollars) 3,437.50 3,000.00 3,750.00 4,125.00 Profit (Dollars) correct in his assertion that BYOB should charge 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

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 3.50 + 3.00 2.50 2.00 1.50 1.00 0.50 0 MC 0 S 1 11 || i I I ATC 0.5 1.0 1.5 20 2.5 QUANTITY (Thousands of cans of beer) MR Price (Dollars per can) 2.50 3.00 3.0 3.5 (Cans) D 1,250 1,000 4.0 Suppose that BYOB charges $2.50 per can. Your friend Kevin 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 Kevin is correct. Quantity Demanded Monopoly Outcome Given the earlier information, Kevin is not $3.00 per can. Profit V Loss Total Revenue Total Cost (Dollars) (Dollars) 3,437.50 3,000.00 3,750.00 4,125.00 Profit (Dollars) correct in his assertion that BYOB should charge 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

Microeconomics: Principles & Policy
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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Given the earlier information, Kevin is not 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 rectangle (diamond symbols) to shade in the area representing the loss. PRICE AND COST (Dollars per unit) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0 MC 0 ATC 0.5 1,0 2.0 2.5 QUANTITY (Thousands of cans of beer) 1.6 MR 3.0 3.6 D 4.0 Monopoly Outcome Profit Loss
Transcribed Image Text:Given the earlier information, Kevin is not 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 rectangle (diamond symbols) to shade in the area representing the loss. PRICE AND COST (Dollars per unit) 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0 MC 0 ATC 0.5 1,0 2.0 2.5 QUANTITY (Thousands of cans of beer) 1.6 MR 3.0 3.6 D 4.0 Monopoly Outcome Profit Loss
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 3.50 + 3.00 2.50 2.00 1.50 1.00 + 0.50 0 MC 0 11 I i I I ATC 0.5 1.0 1.5 2.0 2.5 QUANTITY (Thousands of cans of beer) MR Price (Dollars per can) 2.50 3.00 3.0 3.5 D (Cans) 1,250 1,000 4.0 Suppose that BYOB charges $2.50 per can. Your friend Kevin 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. Monopoly Outcome Complete the following table to determine whether Kevin is correct. Quantity Demanded Profit Given the earlier information, Kevin is not $3.00 per can. Loss Total Revenue Total Cost (Dollars) (Dollars) 3,437.50 3,000.00 3,750.00 4,125.00 Profit (Dollars) correct in his assertion that BYOB should charge 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 cupio
Transcribed Image Text: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 3.50 + 3.00 2.50 2.00 1.50 1.00 + 0.50 0 MC 0 11 I i I I ATC 0.5 1.0 1.5 2.0 2.5 QUANTITY (Thousands of cans of beer) MR Price (Dollars per can) 2.50 3.00 3.0 3.5 D (Cans) 1,250 1,000 4.0 Suppose that BYOB charges $2.50 per can. Your friend Kevin 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. Monopoly Outcome Complete the following table to determine whether Kevin is correct. Quantity Demanded Profit Given the earlier information, Kevin is not $3.00 per can. Loss Total Revenue Total Cost (Dollars) (Dollars) 3,437.50 3,000.00 3,750.00 4,125.00 Profit (Dollars) correct in his assertion that BYOB should charge 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 cupio
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