Is New Hampshire Resort's Policy Consistent with Profit Maximization?

This essay critically examines the pricing policy of New Hampshire Resort and assesses its consistency with the economic principle of profit maximization. The analysis points out that the resort's strategy of charging less during the summer season, despite higher demand, may not align with maximizing profits. By maintaining lower prices during peak season, the resort potentially forgoes revenue that could cover production costs and increase overall profitability. The essay suggests that the resort should consider conducting research to understand occupancy rates of competing resorts and experiment with price changes to optimize revenue. While the current strategy focuses on price elasticity of demand, it overlooks the fundamental principle that profit maximization requires total revenues to exceed total costs. The essay concludes that New Hampshire Resort should reassess its pricing strategy to align with profit maximization objectives, potentially charging similar prices throughout the year.

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Introduction
Firms that focus on achieving the profit maximization objective try as much possible
to ensure that the overall total costs incurred during the production process are lower than
that total revenue obtained (Einstein, 2011). Therefore, they device numerous strategies to
ensure that the profit maximisation goal is attained
Why the policy of new Hampshire is or not consistent with profit maximization
(Samuelson and Marks, Problem # 10 p. 88.
From the economics point of view, the above strategy is not in line with the principle
of profit maximization (Fleetwood, 2014). Thus New Hampshire resort by charging less in
the summer season, it’s deprived from obtaining as much revenue as possible to cover the
costs of production and the same time fetch more profits for the organization. In this case,
when there is an increase in demand, the external facts available may call for an increase in
the price level being charged (Fleetwood, 2014). Further, if new Hampshire resort is running
at a rate of 85 percent occupancy from the former 75 percent, then the other resorts
surrounding it will be able to shut down operations or close to capacity (Fleetwood, 2014). If
not, higher prices will be charged on each and every service offered by the surrounding
resorts. Hence the above demand will be sufficient enough to trigger or support a point of a
relatively higher price (Einstein, 2011). Therefore the optimization curve will be run on a
number of price change test series to effectively come up with a new price (Mankiw and
Taylor, 2011).
Also, the resort would gain much more if undertakes research to find out clearly the
rate of occupancy of the other resorts operating within the same vicinity both in summer and
winter (Einstein, 2011). This will help in making prudent and rational choices and decisions
(Fleetwood, 2014). Where the exists a big variation in e prices being charged on the similar

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services and products when compared to the surrounding resorts, then the resort will be either
charging higher or lower(Fleetwood, 2014). Therefore, given the fact that New Hampshire
resort operates not in a monopoly market such strategy will be relevant in attaining its goal of
profit maximization (Fleetwood, 2014).
Important to note is that economic profits are popular in oligopoly and perfect
monopoly markets where some few firms have the market power element. In this case the
new resort operates in a competitive market where there are many resorts operating, therefore
it has limited power on prices in the market(Varian, 2010). The above strategy of price
cutting may be relevant in attracting customers during the summer period but is not in line
with the principles that govern profit maximization (Fleetwood, 2014). Important to note is
that profit maximization cannot be achieved if the total costs are higher than the total
revenues (Mankiw and Taylor, 2011). Thus the current strategy that is being pursued by the
resort is only focused on the concept of price elasticity of demand (Einstein, 2011). Where by
the occupancy rate increases in the summer when the resort reduces the price. However, this
is contrary to assumption and principles of profit maximization (Varian, 2010).
Conclusion
Conclusively, it can generally be asserted that for New Hampshire to attain its profit
maximization objective, it should revoke its current strategy and charge similar prices in both
summer and winter.

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References
Einstein, C. (2011). "Sacred Economics: Money, Gift, and Society in an Age in
Transition" (Evolver Editions)
Fleetwood, S . (2014). "Do labour supply and demand curves exist?". Cambridge
Journal of Economics. 38 (5): 1087–113. doi:10.1093/cje/beu003.
Mankiw, N.G.; Taylor, M.P. (2011). Economics (2nd ed., revised ed.). Andover:
Cengage Learning.
Varian, H.R.(2010). Intermediate microeconomics: a modern approach. New York,
NY: W.W. Norton & Co.