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QuadPlex Cinema is the only movie theater in Idaho Falls.

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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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Solution Summary

Discusses what QuadPlex can do given that it is suffering losses and it is a local monopoly.

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The manager is not considering the possibility that there is no higher price at which they might make a profit. The attached PowerPoint shows a situation where no matter what price is charged, the monopolist will not make a profit. There is no point at ...

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