Answer to Question #27387 in Economics of Enterprise for Numa

Question

All Open University Malaysia (OUM) students are identical and they are all indifferent between attending the OUM and their next best alternative. Students eat at the student union.
a. If OUM rents space in the student union to several food provider (such as Subway and McDonald’s) who then compete with each other, how much rent can OUM collect? (Illustrate your answer with a graph, showing the quantity of food bought on the horizontal axis and the price of food on the vertical.)
[4 marks]
b. If OUM rents all the space in the student union to a single food provider who charges monopoly prices, how much rent can OUM collect?
[4 marks]
c. If prospective students are aware of the dining situation on campus, how would the decision to go with a monopoly food provider affect the amount of tuition the university can collect?