Question

question 9 (1 point)
scenario 16 - 1
vacation inns of canada (vic) has recently announced intentions of building a new spa resort complex in vernon, british columbia. assume that the hotel and resort market in vernon is characterized by monopolistic competition.
refer to scenario 16 - 1. as a result of the new vic resort, tourists who stay in vernon are likely to experience which of the following, and with what effect?
business - stealing externality, which benefits consumers
business - stealing externality, which harms consumers
product - variety externality, which benefits consumers
product - variety externality, which harms consumers

Explanation:

In monopolistic competition, when a new firm (VIC resort) enters, it creates a product - variety externality. More product variety (a new resort) gives consumers more choices, which is beneficial. A business - stealing externality harms existing firms, not directly related to consumer experience here.

Answer:

Product - variety externality, which benefits consumers.