City Condos Construction, CCC, obtained a loan to purchase city land for a premium condominium building. CCC paid a real estate analyst $100,000 to write a report on the market. The report stated-and CCC believes- that each condo will sell for $5 million and they will build 10 condos on each building floor. The city's condo market is competitive but limits condo towers to 6 floors only. Construction costs rise with the number of floors built. The construction costs are $5 million (or $5m) to build one floor, $20m for two floors, $45m for 3 floors, $80m for four floors, $125m for five floors, and $180m for six floors. (Notice these values are not per floor costs.) In addition to these costs, CCC pays $1m per year in interest on its loan which it cannot avoid and will pay overhead costs for construction of $5m per year which are incurred only when construction occurs. МС, АC, MR MC AC MR a $10 Condo Floors Given the cost and revenue information above, the numeric values for CCC's cost curves in the plot below are a = $ b = $ ,C= , and d = The optimal number of floors to build is which will generate total profits of $ million.

City Condos Construction, CCC, obtained a loan to purchase city land for a premium condominium building. CCC paid a real estate analyst $100,000 to write a report on the market. The report stated-and CCC believes- that each condo will sell for $5 million and they will build 10 condos on each building floor. The city's condo market is competitive but limits condo towers to 6 floors only. Construction costs rise with the number of floors built. The construction costs are $5 million (or $5m) to build one floor, $20m for two floors, $45m for 3 floors, $80m for four floors, $125m for five floors, and $180m for six floors. (Notice these values are not per floor costs.) In addition to these costs, CCC pays $1m per year in interest on its loan which it cannot avoid and will pay overhead costs for construction of $5m per year which are incurred only when construction occurs. МС, АC, MR MC AC MR a $10 Condo Floors Given the cost and revenue information above, the numeric values for CCC's cost curves in the plot below are a = $ b = $ ,C= , and d = The optimal number of floors to build is which will generate total profits of $ million.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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