01 May Question: Imagine that BYOB charges $2.50 per can. Your friend Van says that since BYOE is a monopoly with …
Imagine that BYOB charges $2.50 per can. Your friend Van says that since BYOE 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 folowing table to determine whether Van is correct. 1.Profit maximisation and loss minimisation BYOB is a monopolist in beer production and distribution in the imaginary economy of Hopsville. Imagine 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. Quantity Demanded Total RevenueTotal Cost (Dollars) (Dollars) (Doliars per can) 2.50 3.00 Place the black point (plus symbol) on the graph to indicate the profit maximising 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. Given the earlier information, Van correct in his assertion that BYOB should charge $3.00 per can. Imagine 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 symboi) on the following graph to indicate the profit- maximising 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. Monopoly Outcome 3.00 2.00 Prof TC 4.00 G1.50 Monapoly Outcome Prof ไ 00.5 1.0 1.5 20 2.5 3.0 3.5 4.0 QUANTITY (Thousands of cans of beer) 1 50 1.00 0.00 0 05 1. 15 20 25 30 340 QUANTITY (Thousands of cans of beer)
4, Prolit macximisation and loss minimisation Quantity Demmanded (Cans) Total Revenue Total Cost BYOB is a menopeli in beer production and distribution inthe imaginary economy of Hopsville. Irnagine that Broe cannet price discriminate; that is, R sels ts beer at the same price per can to all customers. The follcig graph shows the marginal cost (MC), marpinal revenue (MR), average total cost CATC, and demard (D) for beer in this market Dolfars per can) DeWars (Dolars) Place the black point (olus symbol) on the praph no indicace the protmising pice and auanuty for BYOB BOB is making a prot, use the green fectangle (triangle Rymbolk) to shada i, the area recreïenung its profit, oo the other hand,ส BY08 sumring a loss, use the purple rectangle faamong symbos) to shade in the area repeenting Given the earer informadon, VanY ▼correct in Ns assertion that BYOB should charge $3.00 per can. imagine that a techtological inovatien decreases ฏ。es oasts so that it neu taces the marginal coat (MC) and average total cost (AIC } given on the felowing graph. Specifically, the technological imonton causes δ decreeee in average fired oests, thereby lowering the ATC c arve and moving the MC Pace the bock DOint (plus symbol) on the following paoh ㆅ kndicate the prett-mtumong once and aantty for BY08. 8.OBs mok ng Drott use the green rectangle Ctrangle symbols) to shade int area retresenting its arent. On abe eener hand. / BY08% sul ering aloss, use the Durole g(diamond symbols to shade taea represenning me loss Manopely Outcome QUANTITY (Teusds et cars et e [magie that BY0e charges §2.50 per can, Your friend van Rays that since BORIs * manepoly with market power, it should charge a higher price of $3.00 per can becauce this will increase BrOe’s prot UANTITY (Thourands of cane st beer
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