Activities In Keystone?

Suppose that Keystone is a firm in the perfectly competitive ski resort business. If all of Keystone’s inpu?

• Suppose that Keystone is a firm in the perfectly competitive ski resort business. If all of Keystone’s input prices unexpectedly doubled, what will happen to Keystone's profit maximizing level of output and its profits in both the short-run and the long-run? Graphically show and explain your answer. In your answer you are to assume that Keystone is currently in a position of long-run equilibrium and that it is the only firm in the industry to experience an increase in input prices.

• Answer:

  Ridiculous question. In a perfectly competitive market, all the producers are small, all the products essentially identical, the costs of entry are low, etc. http://en.wikipedia.org/wiki/Perfect_competition 1. Ski resorts don't sell goods, they sell services, and the level of service can easily different between different vendors. 2. Even the level of service were identical and the mountains were identical and the lifts were identical - there is no way that location can be identical. As they say in real estate, the three most important factors are location, location, and location. 3. Buying a mountain and installing a ski lift, clubhouse, etc. is not cheap. And there are clearly economies of scale. So the idea of a "perfectly competitive ski resort business" is fundamentally insane.