Jim Jones, a motel owner, noticed that just down the street the "Motel 36" advertises a $36-per-night room rental rate on its sign. As a result, this competitor rents all 80 rooms every day by late afternoon. Jim, on the other hand, does not advertise his rate, which is $54 per night, and he averages only a 68% occupancy of his 50 rooms.

There are a lot of other motels nearby, but only Motel 36 advertises its rate on its sign. (Rates at the other motels vary from $48 to $80 per night.) Jim estimates that his actual incremental cost per night for each room rented, rather than remaining vacant, is $12. This $12 pays for all the cleaning, laundering, maintenance, utilities, and so on. Jim believes his eight alternatives are:

What should Jim do? Show how you reached your conclusion.

Resulting ancy Rate Alternative Advertise And Charge $35 per night 100% 42 per night 94 48 per night 80 Do Not Advertise And Charge $48 per night 5 70% 54 per night 68 62 per night 66 68 per night 56 1, 2.