Question

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of their rooms are full). This kind of excess capacity is indicative of what kind of market?A. monopolistically competitiveB. monopolisticC. oligopolyD. competitive

Answer 1

Hotels in New York City with a 20 percent vacancy rate exemplify a monopolistically competitive market, where many firms sell similar but differentiated products, leading to brand loyalty and some price-setting power, yet with excess capacity.

Step-by-step explanation:

The hotels in New York City that frequently experience an average vacancy rate of about 20 percent are indicative of a monopolistically competitive market. In monopolistically competitive markets, there are many firms, and each offers a product that is similar to, but not identical from, the others. This is analogous to the situation in the Mall of America, where a number of different stores sell women's clothing, each with its own style and brand, yet none hold a complete monopoly over women's apparel. The presence of excess capacity is a characteristic of monopolistic competition, where firms tend to operate without fully utilizing their resources or producing at minimum average total cost.

Compared to a competitive market where products are identical, a monopoly that features a single seller, or an oligopoly with few dominant firms, monopolistic competition sits in the middle with many firms selling differentiated products. The differentiation creates brand loyalty and gives firms limited price-setting power, differentiating it from perfect competition but still creating a vigorous competitive environment.

Answer 2

Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of their rooms are full). This kind of excess capacity is indicative of A) Monopolistic Competitive market.

Step-by-step explanation:

Monopolistic competition is a kind of market that is a combination of Monopolistic and Competitive markets. Here, there are numerous competitors in the market but every competitor is different from another and can offer services that are higher in price than its equal competition of the market.

In New York City, there are various hotels and each is an equivalent competition to the other, some of them might charge higher for specific services than the other competitors and some might not but, it will be considered as monopolistic competition.