As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 60 percent chance of low demand and a 40 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P= 500,000 -250Q and P= 800,000-200Q, respectively. Your cost function is (Q) = 150,000+ 482,000 Q How many new homes should you build, and what profits can you expect? Number of homes you should build: homes Profits you can expect: $

As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large neighborhood. There is a 60 percent chance of low demand and a 40 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P= 500,000 -250Q and P= 800,000-200Q, respectively. Your cost function is (Q) = 150,000+ 482,000 Q How many new homes should you build, and what profits can you expect? Number of homes you should build: homes Profits you can expect: $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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As the manager of Smith Construction, you need to make a decision on the number of homes to build in a new residential area where
you are the only builder. Unfortunately, you must build the homes before you learn how strong demand is for homes in this large
neighborhood. There is a 60 percent chance of low demand and a 40 percent chance of high demand. The corresponding (inverse)
demand functions for these two scenarios are P= 500,000 -250Q and P= 800,000 -200Q, respectively. Your cost function is C(q) =
150,000+ 482,000 Q.
How many new homes should you build, and what profits can you expect?
Number of homes you should build:
homes
Profits you can expect: $

Definition Definition Structural system an enterprise uses to collect, store, report, retrieve, and process financial data. Accounting information systems are used by business analysts, auditors, accountants, and consultants for accurate and efficient access to financial data.

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