ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Answer everything in the photo please.
Lagatt Green is a monopoly beer producer and distributor operating in the hypothetical economy of Lightington. Assume that Lagatt Green is not able
price discriminate, and so it sells its beer to all customers at the same price per bottle. The following graph gives the marginal cost (MC), marginal
revenue (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 a
profit, 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)
4.00
3.50
3.00 +
2.50 +
2.00
1.50 +
MC
1.00 +
0.50 +
0
0
0.5
ATC
1.5
MR
1.0
2.0
2.5
3.0
QUANTITY (Thousands of bottles of beer)
3.5
D
4.0
+
Monopoly Outcome
Profit
Loss
expand button
Transcribed Image Text:Lagatt Green is a monopoly beer producer and distributor operating in the hypothetical economy of Lightington. Assume that Lagatt Green is not able price discriminate, and so it sells its beer to all customers at the same price per bottle. The following graph gives the marginal cost (MC), marginal revenue (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 a profit, 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) 4.00 3.50 3.00 + 2.50 + 2.00 1.50 + MC 1.00 + 0.50 + 0 0 0.5 ATC 1.5 MR 1.0 2.0 2.5 3.0 QUANTITY (Thousands of bottles of beer) 3.5 D 4.0 + Monopoly Outcome Profit Loss
Suppose Lagatt Green charges $2.75 per bottle. Your study partner Taio says that because Lagatt Green is a monopoly with market power, it should
charge the higher price of $3.00 per bottle in order to increase its profit.
Complete the following table to determine whether Taio is correct.
Quantity Demanded.
Total Revenue
(Dollars)
Price
(Dollars per bottle)
2.75
3.00
Given the earlier information, Taio
PRICE (Dollars per unit)
4.00
Suppose that a technological innovation decreases Lagatt Green'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.
3.50
Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for Lagatt Green. If Lagatt Green is
making a profit, 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 the loss.
3.00
2.50
2.00
1.50
1.00
0.50
0
MC
(Cans)
0
0.5
1.5
ATC
MR
1.0
2.5
3.0
QUANTITY (Thousands of bottles of beer)
2.0
correct in his assertion that Lagatt Green should charge $3.00 per bottle.
Total Cost
(Dollars)
3.5
D
4.0
+
Profit
(Dollars)
Monopoly Outcome
Profit
Loss
expand button
Transcribed Image Text:Suppose Lagatt Green charges $2.75 per bottle. Your study partner Taio says that because Lagatt Green is a monopoly with market power, it should charge the higher price of $3.00 per bottle in order to increase its profit. Complete the following table to determine whether Taio is correct. Quantity Demanded. Total Revenue (Dollars) Price (Dollars per bottle) 2.75 3.00 Given the earlier information, Taio PRICE (Dollars per unit) 4.00 Suppose that a technological innovation decreases Lagatt Green'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. 3.50 Place the black point (plus symbol) on the following graph to indicate the profit-maximizing price and quantity for Lagatt Green. If Lagatt Green is making a profit, 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 the loss. 3.00 2.50 2.00 1.50 1.00 0.50 0 MC (Cans) 0 0.5 1.5 ATC MR 1.0 2.5 3.0 QUANTITY (Thousands of bottles of beer) 2.0 correct in his assertion that Lagatt Green should charge $3.00 per bottle. Total Cost (Dollars) 3.5 D 4.0 + Profit (Dollars) Monopoly Outcome Profit Loss
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