Scenario 16-1
Vacation Inns of Canada (VIC) has recently announced intentions of building a new spa resort complex in Vernon, British Columbia.Assume that the hotel and resort market in Vernon is characterized by monopolistic competition.
-Refer to Scenario 16-1.As a result of the new VIC resort,tourists who stay in Vernon are likely to experience which of the following,and with what effect

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by product differentiation and non-price competition. The introduction of a new spa resort complex by VIC will increase product variety in the market, which is likely to benefit consumers who stay in Vernon as they will have more options to choose from. This is an example of a product-variety externality that benefits consumers.

Scenario 16-1 Vacation Inns of Canada (VIC) Has Recently Announced Intentions of Intentions