How many new homes should you build

Reference no: EM133380761

Question: 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 = 700,000 -200Q, respectively. Your cost function is C(Q) = 125,000 + 350,000Q.

How many new homes should you build, and what profits can you expect?

Number of homes you should build: homes Profits you can expect: $

Reference no: EM133380761

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