Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full) . This kind of excess capacity is indicative of what kind of market?

A) Perfect competition and monopolistic competition
B) Perfect competition only
C) Monopolistic competition only
D) Oligopoly

Question

Grant McCarthy · Accepted Answer

Final Answer : C, Explanation :  Monopolistic competition is characterized by many sellers, differentiated products, and free entry and exit, which can lead to excess capacity as firms have some control over pricing but still face competition, leading to inefficiencies such as the average vacancy rate described.

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