Answer to Question #52709 in Microeconomics for Yana

Question

Assume that the hotel room market in some country satisfies the following set of assumptions:
- the market is perfectly competitive
-the market is presently in long run equilibrium
-all hotels are the same.
a) Graph the present long run equilibrium situation for both a hotel and teh entire hotel industry in that country (Put the number of hotel rooms on horizontal axis). Give a brief explanation for graphs.

Answer 1

If the World Travel Organization publishes the report, cautioning travelers about the risks of travelling to that country and travelers are advised to exercise causation since protests, often at short notice,can be expected across major cities in that country, there will be damages to hotel business. The price will decrease, quantity will decrease too, so the profits in the short run will decrease too. In the long run the damages may be even more significant, if the situation in the country will not improve. The individual hotels will shut down, but the entire hotel market will exist.