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 1.00 0.50 0 MC 0 0.5 ATC MR 1.0 1.5 20 2.5 3.0 QUANTITY (Thousands of bottles of beer) Price (Dollars per bottle) 2.00 2.25 D 3.5 Given the earlier information, Gabriel 4.0 Complete the following table to determine whether Gabriel is correct. Quantity Demanded Total Revenue (Cans) (Dollars) Monopoly Outcome Profit Suppose Lagatt Green charges $2.00 per bottle. Your study partner Gabriel says that because Lagatt Green is a monopoly with market power, it should charge the higher price of $2.25 per bottle in order to increase its profit. Loss ? Total Cost (Dollars) Profit (Dollars) correct in his assertion that Lagatt Green should charge $2.25 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.
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 1.00 0.50 0 MC 0 0.5 ATC MR 1.0 1.5 20 2.5 3.0 QUANTITY (Thousands of bottles of beer) Price (Dollars per bottle) 2.00 2.25 D 3.5 Given the earlier information, Gabriel 4.0 Complete the following table to determine whether Gabriel is correct. Quantity Demanded Total Revenue (Cans) (Dollars) Monopoly Outcome Profit Suppose Lagatt Green charges $2.00 per bottle. Your study partner Gabriel says that because Lagatt Green is a monopoly with market power, it should charge the higher price of $2.25 per bottle in order to increase its profit. Loss ? Total Cost (Dollars) Profit (Dollars) correct in his assertion that Lagatt Green should charge $2.25 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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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
1.00
0.50
0
MC
0
0.5
ATC
MR
1.0 1.5 2.0 2.5 3.0
QUANTITY (Thousands of bottles of beer)
Price
(Dollars per bottle)
2.00
2.25
D
3.5
Given the earlier information, Gabriel
4.0
Complete the following table to determine whether Gabriel is correct.
Quantity Demanded Total Revenue
(Cans)
(Dollars)
Monopoly Outcome
Profit
Suppose Lagatt Green charges $2.00 per bottle. Your study partner Gabriel says that because Lagatt Green is a monopoly with market power, it should
charge the higher price of $2.25 per bottle in order to increase its profit.
Loss
?
Total Cost
(Dollars)
Profit
(Dollars)
correct in his assertion that Lagatt Green should charge $2.25 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.
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