In exchange for a share of the revenues earned on campus, State U has granted CheapFizz the exclusive right to sell soft drinks in the student union and in vending machines on campus. Prior to the deal, three soft drink companies sold beverages on campus; now no other soft drink company is allowed to sell its products on campus. Prior to the deal, a 12-ounce can of CheapFizz sold for 75 cents. After the deal you would expect a 12-ounce can of CheapFizz to sell for:
A)75 cents because that is the market price.
B)less than 75 cents because CheapFizz will have greater volume and so can lower its price.
C)more than 75 cents because the demand curve for CheapFizz soda will shift to the left.
D)more than 75 cents because CheapFizz is the only company that can sell soda on campus.

Question

Quizplus · Accepted Answer

Without the competitors, CheapFizz can raise its price without losing all of its sales.

In Exchange for a Share of the Revenues Earned on Campus