The Zen Hotel has a local monopoly because of a historic license to operate inside Blue Rock State Park. Recently hired consultants have found that the Zen Hotel enjoys a strong market demand of Q = 4,200 - 5P, where Q is annual stays, and P is the price that the Zen Hotel charges per night. The total cost of accommodating Q stays is C = 120Q. The hotel manager has asked you to review the occupancy goal for the coming year, which is 1,000 stays. Do you agree that this is the most profitable number of stays for the Zen Hotel? Yes, Q = 1,000 is the right level. %3D No, the Zen Hotel should aim for 20% fewer stays, i.e. Q = 800. No, the Zen Hotel should aim for 80% more stays, i.e. Q = 1,800. No, the Zen Hotel can accommodate up to Q = 4,200 stays, and it should try to reach that level to maximize its profit.
The Zen Hotel has a local monopoly because of a historic license to operate inside Blue Rock State Park. Recently hired consultants have found that the Zen Hotel enjoys a strong market demand of Q = 4,200 - 5P, where Q is annual stays, and P is the price that the Zen Hotel charges per night. The total cost of accommodating Q stays is C = 120Q. The hotel manager has asked you to review the occupancy goal for the coming year, which is 1,000 stays. Do you agree that this is the most profitable number of stays for the Zen Hotel? Yes, Q = 1,000 is the right level. %3D No, the Zen Hotel should aim for 20% fewer stays, i.e. Q = 800. No, the Zen Hotel should aim for 80% more stays, i.e. Q = 1,800. No, the Zen Hotel can accommodate up to Q = 4,200 stays, and it should try to reach that level to maximize its profit.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:The Zen Hotel has a local monopoly because of
a historic license to operate inside Blue Rock
State Park. Recently hired consultants have
found that the Zen Hotel enjoys a strong market
demand of Q = 4,200 - 5P, where Q is annual
stays, and P is the price that the Zen Hotel
charges per night. The total cost of
accommodating Q stays is C = 120Q. The hotel
manager has asked you to review the occupancy
goal for the coming year, which is 1,000 stays.
Do you agree that this is the most profitable
number of stays for the Zen Hotel?
%3D
Yes, Q = 1,000 is the right level.
%3D
No, the Zen Hotel should aim for 20%
fewer stays, i.e. Q = 800.
No, the Zen Hotel should aim for 80%
more stays, i.e. Q = 1,80O.
No, the Zen Hotel can accommodate
up to Q = 4,200 stays, and it should try
to reach that level to maximize its
profit.
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