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February 28, 2015

Homework Help: Market Power

Posted by raja on Wednesday, October 27, 2010 at 11:40pm.

QuadPlex Cinema is the only movie theater in Idaho Falls. The nearest rival movie theater, the Cedar Bluff Twin, is 35 miles away in Pocatello. Thus QuadPlex Cinema possesses a degree of market power. Despite having market power, QuadPlex Cinema is currently suffering losses. In a conversation with the owners of QuadPlex, the manager of the movie theater made the following suggestions: “Since QuadPlex is a local monopoly, we should just increase ticket prices until we make enough profit.” Comment on this strategy. How might the market power of QuadPlex Cinema be measured? Also recommend, the options that QuadPlex consider in the long run. Fully explain your answer in terms of market power.

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