(Solution) An article in the Wall Street Journal reported that large hotel chains, such as Marriott, are tending to reduce the number of hotels that they... > Snapessays.com


(Solution) An article in the Wall Street Journal reported that large hotel chains, such as Marriott, are tending to reduce the number of hotels that they...


Please help me with the attached econ questions. Thank you for your help in advance.1.

 

An article in the

 

Wall Street Journal

 

reported that large hotel chains, such as

 

Marriott, are tending to reduce the number of hotels that they franchise to outside

 

owners and increase the number the chain owns and manages itself. Some chains

 

are requiring private owners or franchisees to make upgrades in their hotels, but

 

they are having a difficult time enforcing the policy. Marriott says the upgrading is

 

important because “we’ve built our name on quality.”

 

a. What type of agency problem is involved here?

 

b. Why would Marriott worry about the quality of hotels it doesn’t own but

 

franchises?

 

c. Why would a chain such as Marriott tend to own its hotels in resort areas, such as

 

national parks, where there is little repeat business, and franchise in downtown areas,

 

where there is a lot of repeat business? Think of the reputation effect and the incentive

 

of franchises to maintain quality.

 

2.

 

Suppose you are the manager of a California winery. How would you expect the

 

following events to affect the price you receive for a bottle of wine? Explain your

 

answers.

 

a. The price of a comparable French wine decreases.

 

b. One hundred new wineries open in California,

 

c. The unemployment rate in the United States decreases.

 

d. The price of cheese increases.

 

e. The price of a glass bottle increases significantly due to new government antishatter

 

regulations.

 

f. Researchers discover a new wine-making technology that reduces production costs.

 

g. The price of wine vinegar, which is madde from the leftover grape mash, increases.

 

h. The average age of consumers increases, and older people drink less wine.

 

3. After Iraq invaded Kuwait, gasoline prices rose dramatically – up 50 percent. There

 

were many effects of the increased price of gasoline. Explain the following effects in

 

terms of the income effect, substitution effect, or both effects:

 

a. People drove less and purchased less gas.

 

b. People ate out less often.

 

c. People had more tune-ups done on their cars.

 

d. Bike sales went up.

 

e. The sale of lottery tickets fell.

 


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This question was answered on: Sep 21, 2023

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