The Economic Development: Profits and the Shut Down Decision

Profits and the Shutdown Decision
Name
Institution
Profits and the Shutdown Decision
A profitable motel might shut down in the long run if it is located in a land that is extremely valuable based on the economic development. The motel may shut down because being situated in an extremely valuable location due to economic development it would be possible to sell the land and get capital gain. Further, the economic development is bound to attract more customers and in the process the cost of goods and services will rise. This means the taxes on the land would increase and the possibility that better motels could spring up because of the economic development. If this is the only motel in the location, the owner is likely to lose the monopoly when other motels are built because of the rapid economic development (Hoag & Hoag, 2006).
The type of costs involved in deciding to have the motel shut down is opportunity costs. Opportunity costs refer to the value of the next highly ...