1. Profit mention and loss anatom Lagt dreen is a monopoly beer producor and sobributor operating in the hypothetical economy of Lightington. Assume that Lagat dreen is not able price dine, and it selle in her to al customers at the same price per hemie. The following graph gives the marginale (14), marginal (0) (1) ATC and Gr Leningr black) on the graph in profanang price and quality for all Gran L profit use the proon rectangle (triangle symbots) to shade in the area representing its profit. On the other hand, Lagott Creen issuring a ATC X 13141538 GUNTITY(Tands of bots of b + My C ? Suppose Lagatt Green charges $2.50 per bottle. Your study partner Jabrill 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 Jabrill is correct. Quantity Demanded (Cans) Total Revenue (Dollars) Price (Dollars per bottle) 2.50 3.00 Given the earlier information, Jabrill Y Total Cost (Dollars) Profit (Dollars) correct in his assertion that Lagatt Green should charge $3.00 per bottle. 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.
1. Profit mention and loss anatom Lagt dreen is a monopoly beer producor and sobributor operating in the hypothetical economy of Lightington. Assume that Lagat dreen is not able price dine, and it selle in her to al customers at the same price per hemie. The following graph gives the marginale (14), marginal (0) (1) ATC and Gr Leningr black) on the graph in profanang price and quality for all Gran L profit use the proon rectangle (triangle symbots) to shade in the area representing its profit. On the other hand, Lagott Creen issuring a ATC X 13141538 GUNTITY(Tands of bots of b + My C ? Suppose Lagatt Green charges $2.50 per bottle. Your study partner Jabrill 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 Jabrill is correct. Quantity Demanded (Cans) Total Revenue (Dollars) Price (Dollars per bottle) 2.50 3.00 Given the earlier information, Jabrill Y Total Cost (Dollars) Profit (Dollars) correct in his assertion that Lagatt Green should charge $3.00 per bottle. 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.
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.3P
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Question
Transcribed Image Text:1. Profit maximization and loss minimization
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
(MR), avage total cost (ATC), and demand (D) curves that Lagall Gran faces for bar in Lightington.
Place the black point (plus symbol) on the graph to indicate the profit-maximizing price and quantity for Lagalt Crean. If Lagatt Green is making a
profit use the green rectangle (triangle symbols) to shade in the area representing its preft. On the other hand, if Lagatt Creen is suffering a loca,
use the purple rectangle (diamond symbols) to shade in the area representing its loss
201
390
2.90
1.50
1.00
0.50
D
6
MO
ATC
MR
45 13 15 20 25 30 56
QUANTITY (Thousands of batles of bour)
D
401
**
Monopoly Cute
Pr
LO
(0)
Suppose Lagatt Green charges $2.50 per bottle. Your study partner Jabrill 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 Jabrill is correct.
Quantity Demanded
Price
(Dollars per bottle)
2.50
3.00
(Cans)
Given the earlier information, Jabrill
Total Revenue
(Dollars)
Total Cost
(Dollars)
Profit
(Dollars)
correct in his assertion that Lagatt Green should charge $3.00 per bottle.
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.
Transcribed Image Text: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.
?
PRICE (Dollars per unit)
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0
0
MC
0.5
1.5
2.0
MR
ATC
1.0
2.5 3.0
QUANTITY (Thousands of bottles of beer)
3.5
D
4.0
Monopoly Outcome
Profit
Loss
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