Suppose that we learn that hotels in Los Angeles generally operate with an average vacancy rate of 15 percent (in other words, 85 percent of the hotel rooms are filled with guests).Given this information about excess capacity, we would judge this market to be
A)an oligopoly.
B)a perfectly competitive market.
C)a monopolistically competitive market.
D)a monopoly.

Question

Quizplus · Accepted Answer

The given information about the average vacancy rate indicates that there is excess capacity in the hotel market in Los Angeles. This is a characteristic of monopolistic competition, where firms differentiate their products and have some pricing power but still face competition from other firms. In a perfectly competitive market, there would be no excess capacity, while in an oligopoly or monopoly, firms would have greater pricing power and control over the market.

Suppose That We Learn That Hotels in Los Angeles Generally