The introduction of the new optical computer technology, Neutron, provided Quasar Computers with a patent or an exclusive right to the inventor that exclude others from making, selling, or using the invention for a period of time (General Information Concerning Patents, n.d.). Therefore, it allows Quasar Computers to operate in a monopoly market with absent of absolute barriers to entry from its competitors and is the only firm that can use the all-optical technology in the market. As a result, the firm is able to restrict output and raise prices to maximize its profits (Monopolistic Market, 2015). Study showed that the maximization of profit in monopoly market is when the production output level where the marginal cost (MC) is equal to the marginal revenue (MR) (Posner & Landes, 1981). This is demonstrated by the simulation when marginal cost intersects with marginal revenue, the price of Neutron will be $2,550 per unit and will yield a profit of $1.29 billion. If increasing the price, it will shift the demand curve to the left and results decreasing in the demand, thus, decreasing the profit. On the other hand, decreasing the price will result in increasing in the demand. However, as demand increase, the firm will need to increase the supply to meet …show more content…
To achieve this objective, $600 million was selected for advertising budget. Although increasing the advertising budget to $600 million, it will increase the total cost from $12.96 billion to $16.06 billion; however, it will increase the marginal revenue and demand. With the new marginal revenue and demand, Quasar Computers can adjust the price to maximize profitability by reducing it to $2,450 per unit where marginal revenue equal to marginal cost. As a result, the profits increase from $1.29 billion to $2.74