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| Suppose you own a resort hotel in the perfectly competitive
tourist market of Palm Desert. The lefthand panel above depicts the hotel industry in Palm
Desert for each of the four seasons: W=winter, Sp=spring, Su=summer, and F=fall. |
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| Your task is to illustrate your profit-loss situation for
each season in the two righthand panels above, which depict your hotel's cost curves,
(assumed to be the same for each season). Use the center panel for the winter and summer
seasons, and the the righthand panel for the spring and fall seasons. |
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| For each season: |
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1. Draw your marginal revenue curve. |
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2. Indicate your most profitable output level if you
operate. |
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3. Indicate the size of your profits or losses if you
operate. |
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| Complete the following table: |
| Season |
Profits (>,<,=) 0? |
Operate or shutdown? |
| Winter |
|
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| Spring |
|
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| Summer |
|
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| Fall |
|
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