3.1 Raul is operating a studio house in La Palma de Majorca.

Hundreds of hotels, motels, villas, apartment, and studio houses are offered as tourist accommodations in the area.

Raul opened up his studio house the previous year and he rents an average of 12 studios per day over the whole season at €80 per studio per day. He faces total costs of €960 per day.

a. How would you characterize the market structure of tourist accommodations in La Palma de Majorca? Why?

b. Is this industry in short or long-run equilibrium? Explain using the data given in the problem above.

c. Are there too many or too few tourist accommodations supplied in La Palma de Majorca? Explain.