Assume that the market for executive travel is perfectly competitive.If the availability of time-sharing reduces transaction costs and the owner's cost of negotiating for a single trip, which of the following situations must occur?
A)The hours of flight available will increase.
B)The hours of flight available will decrease.
C)The cost of flying will remain steady.
D)The cost of flying will increase.

Question

Quizplus · Accepted Answer

The availability of time-sharing reduces transaction costs and the owner's cost of negotiating for a single trip, which means that it will be easier and more cost-effective for executives to travel. As a result, the demand for executive travel will likely increase. In a perfectly competitive market, an increase in demand would lead to an increase in supply. Therefore, the hours of flight available will increase. The cost of flying may or may not remain steady, depending on whether the increase in supply offsets the increase in demand.

Assume That the Market for Executive Travel Is Perfectly Competitive