Managerial Economics 2nd Edition by William Boyes

Exercise 4

Currently, a fast-food firm has a monopoly in the university student union. The monopoly pays the university $75,000 a year in order to maintain it. The firm earns an economic profit of $290,000 per year. Another fast-food firm wants to enter the market and offer its fare to students. The manager of the first firm calls the university president asking her to maintain the first firm's monopoly. How much would the first firm be willing to pay to keep the monopoly?