BUS 640 Week 5 Discussion 2 and Exercise

Wk 5 Discussion 2

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. Respond to at least two of your fellow students’ postings.

Applied Problems 5

Complete the following problems from your text:

Chapter 11: Applied Problem 8

Suppose you own a home remodeling company. You are currently earning short-run profits. The home remodeling industry is an increasing-cost industry. In the long run, what do you expect will happen to

1. Your firm's costs of production? Explain.

2. The price you can charge for your modeling services? why?

3. Profits in home remodeling? why?

Chapter 13: Applied Problem 1

Show work and explain analysis. Submit your answers to the instructor.

1. When McDonald's Corp. reduced the price of its Big Mac by 75 percent if customers also purchased French fries and a soft drink, The Wall Street Journal reported that the company was hoping the novel promotion would revive its U. S. sales growth. It didn't. Within two weeks sales had fallen. Using your knowledge of game theory, what do you think disrupted McDonald's plans?