Question

 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 cost (AC), 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.

 Note: Dashed drop lines will automatically extend to both axes. Select and drag the rectangles from the palette to the graph. To resize, select one of the points on the rectangle and move to the desired position.

 Suppose that BYOB charges $2.00 per can. Your friend Yakov 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 Yakov is correct.

 Given the earlier information, Yakov _______  correct in his assertion that BYOB should charge $2.25 per can.

 Suppose that a technological innovation decreases BYOB's costs so that it now faces the marginal cost (MC) and average given on the following graph. Specifically, the technological innovation causes a decrease in average fixed costs, thereby I AC 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. I making a profit, use the green rectangle (triangle symbols) to shade in the area representing its profit. On the other hand suffering a loss, use the purple rectangle (diamond symbols) to shade in the area representing the loss.

Answer 1

Price	QD	TR	TC	Profit
2	1000	2000	2750	-750
2.25	750	1687.5	2625	-937.5

Blank - Is not