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 excess capacity is indicative of a(n)____ industry.
A) perfectly competitive
B) monopoly
C) monopolistically competitive
D) oligopoly

Question

Quizplus · Accepted Answer

The fact that hotels in New York City have an average vacancy rate of 20 percent indicates that the industry is monopolistically competitive. In a perfectly competitive market, firms would be forced to operate at full capacity, as any excess capacity would lead to lower prices and potentially put firms out of business. In a monopoly or oligopoly market, firms may have more control over the market and pricing, making it less likely to have excess capacity. However, in a monopolistically competitive market, firms differentiate their products and services in order to compete, which can lead to excess capacity as they try to attract customers with different preferences.

Hotels in New York City Frequently Experience an Average Vacancy