What price should be charged for a midsized automobile

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Reference no: EM13243045

You are the owner of a local honda dealership. Unlike other dealerships in the area, you take pride in your "no haggle" sales policy. Last year, your dealership earned record profits of $1.5 million. However, according to the local Chamber of Commerce, your earnings were 10 percent less than either of your competitors. In your market, the price elasticity of demand for mid-sized honda automobiles is -4.5. In each of the last 5 years, your dealership has sold more mid-sized automobiles than any other honda dealership in the nation. This entitled your dealership to an additional 30 percent off the manufacturer's suggested retail price (MSRP) in each year. Taking this into account, your marginal cost of a midsized automobile is $11,000. What price should you charge for a midsized automobile if you expect to maintain your record sales?

Reference no: EM13243045

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