Scenario 17-1
Vacation Inns of America (VIA) has recently announced intentions of building a new hotel/resort complex in Myrtle Beach, South Carolina. Assume that the hotel/resort market in Myrtle Beach is characterized by monopolistic competition.
-Refer to Scenario 17-1.As a result of the new VIA hotel/resort,tourists who stay in Myrtle Beach are likely to experience a

Question

Quizplus · Accepted Answer

The entry of VIA in the market will increase product variety, which is a positive externality for tourists as it will lead to a wider selection of hotels and resorts to choose from. This benefits consumers as they can choose from a greater variety of accommodations that might better suit their preferences and budget. Therefore, the correct answer is (B) product-variety externality, which benefits consumers.