**Title: Decision-Making in Residential Construction****Introduction:**As the manager of Smith Construction, you face a critical decision regarding the number of homes to build in a new residential area where you are the sole builder. A significant challenge is that you must determine the volume of homes to construct without prior knowledge of the market demand. In this scenario, there's a 60 percent chance of encountering low demand and a 40 percent chance of high demand in this large neighborhood.**Market Demand Scenarios:**The (inverse) demand functions corresponding to these two scenarios are as follows:1. **Low Demand Scenario:**\[ P = 400,000 - 4000Q \]2. **High Demand Scenario:**\[ P = 900,000 - 2500Q \]**Cost Function:**Your cost function for the number of homes built is given by:\[ C(Q) = 125,000 + 430,000Q \]**Decision Point:**How many new homes should you build, and what profits can you expect?**Evaluation of Homes to Build:****Number of homes you should build:** ______ homesClick here to understand how to calculate the optimal number of homes and expected profits based on the given demand and cost functions. Detailed explanations and step-by-step calculations are provided to guide you through the decision-making process. **Conclusion:**Making informed decisions in uncertain market conditions requires understanding demand scenarios and cost implications. As illustrated, a careful analysis can help in determining the optimal number of homes to build to maximize expected profits.For more detailed information, visit our comprehensive guides on economic decision-making in construction management.

Profit is maximized when the difference between TR and the TC is maximised. The difference is…

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 = 400,000-400Q and P=900,000-2500, respectively. Your cost function is C(Q) = 125,000+ 430,0000. How many new homes should you build, and what profits can you expect? Number of homes you should build: homes

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 = 400,000-400Q and P=900,000-2500, respectively. Your cost function is C(Q) = 125,000+ 430,0000. How many new homes should you build, and what profits can you expect? Number of homes you should build: homes

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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