### Step 1: Find the Profit-Maximizing Quantity and Price To find the **profit-maximizing quantity**, locate the point where **marginal revenue (MR)** intersects **marginal cost (MC)**. On the graph, this intersection occurs at **Q = 1.5** (thousands of bottles of hot sauce). - The corresponding **price** is found by going up from this quantity to the **demand curve (D)**, which is about **$3.00**. **Explanation:** A monopoly maximizes profit where MR = MC. At this quantity, the price is set according to the demand curve. --- ### Step 2: Determine Profit or Loss - At the profit-maximizing quantity (Q = 1.5), check the **average total cost (ATC)**. - At Q = 1.5, ATC is about **$3.20**, which is **higher than the price ($3.00)**. **Explanation:** Since **ATC > Price**, Fire Dragon is suffering a **loss**. The loss per unit is \( ATC - P = \$3.20 - \$3.00 = \$.20 \), and total loss is this amount times the quantity sold. --- ### **Final Answer** - **Place the black point (plus symbol) at Q = 1.5, P = $3.00.** - **Shade the area representing a loss (purple rectangle/diamond) between the ATC and the price at Q = 1.5.** This area is the vertical distance between the ATC curve and the demand curve at the profit-maximizing quantity.