Homework Help: Managerial Economics

Posted by BJ on Thursday, December 24, 2009 at 6:34pm.

A CA resort offers year-round activities and the resort's operating costs are essentially the same in winter and summer. Mgmt charges higher nightly rates in the winter, when its average occupancy rate is 75%, than in the summer, when its occupancy rate is 85%.

My question is, this can also be consistent with profit maximization, correct?

Managerial Economics - Ms. Sue, Thursday, December 24, 2009 at 6:43pm
That pricing structure doesn't make sense to me. Usually hotels charge more when rooms are scarcer.
Managerial Economics - BJ, Thursday, December 24, 2009 at 8:07pm
Ms. Sue, the resort's operating costs are the same in the winter and the summer. But their rooms are filled more in the summer than in the winter, so to maximize their profits, the resort increases price to increase sales and profits, but the marginal costs remains the same.

My question is, I was just getting confirmation that this is also consistent with the profit-maximization rule? Correct?

Thanks
Managerial Economics - Ms. Sue, Thursday, December 24, 2009 at 8:19pm
But would management have a higher occupancy rate in the winter if it lowered the consumer's cost per room?

http://en.wikibooks.org/wiki/Microeconomics/Perfect_Competition#Profit_Maximization_Rule

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