Number of homes you should build

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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 = 300,000 - 400Q and P = 500,000 - 275Q, respectively. Your cost function is C(Q) = 140,000 + 240,000Q. 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: EM131159855

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