Lagatt Green is a monopoly beer producer and distributor operating in the hypoth

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.
Monopoly OutcomeProfitLoss00.51.01.52.02.53.03.54.04.003.503.002.502.001.501.000.500PRICE (Dollars per bottle)QUANTITY (Thousands of bottles of beer)DMRMCATC
Suppose Lagatt Green charges $2.75 per bottle. Your study partner Gabriel 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 Gabriel is correct.
PriceQuantity DemandedTotal RevenueTotal CostProfit
(Dollars per bottle)(Cans)(Dollars)(Dollars)(Dollars)
2.75750

3.00750

Given the earlier information, Gabriel 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.
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.
Monopoly OutcomeProfitLoss00.51.01.52.02.53.03.54.04.003.503.002.502.001.501.000.500PRICE (Dollars per unit)QUANTITY (Thousands of bottles of beer)DMRMCATC
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