Market Structures Simulation Analysis

ECO 561

Market Structures Simulation Analysis


Quasar Computers is the pioneer of all optical notebook computer.   Quasar Computers is a monopoly for the next three years and holds the patent on optical computers.   In 2003, if Quasar Computers was to sell 5.3 millions ‘Neutrons’ for $2550, they would have a total profit of $1.29 billion.   That is the maximum profit point where marginal costs equal marginal revenue.

Quasar Computers are reviewing the advertising budget for 2004.   The impact of advertising and promotional activities on demand, price, revenue, and profits.   Robert recommends to increase the advertising budget to $600 million.   Robert thinks with more investment in brand building would increase profits as the volumes rise.   To achieve the maximum profit point, the consumer would need to purchase 7.7 million ‘Neutrons’ at $2450 each, for a total profit for Quasar Computers $2.74 million.

Quasar Computers will be reducing production costs in 2005 by streamlining the manufacturing facilities.   David recommends the upgrade the production process.   According to David, the amount of waste during the production process increases the production costs.   To upgrade the production process and machinery will cut out those losses and can result in the reduction of cost per unit.   By selling 9.4 million ‘Neutrons’ for $2200, the total profit would be $2.21 billion, achieving the maximum profit point.

Jane recommends specific improvements to the areas with major losses and improve them.   As a result of the lack of competition, Jane recommends pass the increase cost of production to the customer by increasing the cost of the ‘Neutron’.   With Jane’s recommendations, Quasar Computers would need to see the ‘Neutron’ for $2300.   To achieve a maximum profit point, Quasar Computers would need to sell 8.8 million ‘Neutrons’ for a total profit of 1.52 billion at the price of $2300 each.