Myrtle Beach, South Carolina, is lined with virtually identical motels. Summertime rates run about $250 a night. During the winter, rooms rent for as little as $70 a night. Assume the average fixed cost of a room per night, including insurance, taxes, and depreciation, is $30. The average guest-related cost (average variable cost) for a room each night, including cleaning service and linens, is $65. The average total cost, which is the sum of the average fixed cost ($30) and the average variable cost ($65), is $95. During the winter, these hotels should shut down until summer because they cannot cover all of their fixed costs.

Myrtle Beach, South Carolina, is lined with virtually identical motels. Summertime rates run about $250 a night. During the winter, rooms rent for as little as $70 a night. Assume the average fixed cost of a room per night, including insurance, taxes, and depreciation, is $30. The average guest-related cost (average variable cost) for a room each night, including cleaning service and linens, is $65. The average total cost, which is the sum of the average fixed cost ($30) and the average variable cost ($65), is $95. During the winter, these hotels should shut down until summer because they cannot cover all of their fixed costs.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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