MANAGERIAL/ECON+BUS/STR CONNECT ACCESS
9th Edition
ISBN: 2810022149537
Author: Baye
Publisher: MCG
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Chapter 12, Problem 12PAA
To determine
To calculate profit and the number of homes.
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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 30 percent chance of low
demand and a 70 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 400,000-250Q and P
= 900,000-125Q, respectively. Your cost function is C(Q) = 185,000 + 652, 500Q. How many new homes should you build, and what profits can you
expect? Number of homes you should build: homes Profits you can expect: $
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 80 percent chance of low demand and a 20 percent chance of high demand. The corresponding (inverse) demand functions for these two scenarios are P = 300,000 −300Q and P = 800,000 −200Q, respectively. Your cost function is C(Q) = 180,000 + 260,000Q.
How many new homes should you build, and what profits can you expect?
Give typing answer with explanation and conclusion
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 70
percent chance of low demand and a
30 percent chance of high demand.
The corresponding (inverse) demand
functions for these two scenarios are P
= 300,000 -450Q and P = 700,000
-325Q, respectively. Your cost function
is C(Q) = 135,000 + 172,500Q.
How many new homes should you
build, and what profits can you expect?
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- Betty runs a toy store. Each toy costs Betty $4 and sells for $10 (so the gross profit per unit sold is $6). Daily demand varies according to the following table: Demand Probability 90 0.64 100 0.24 110 0.12 At the beginning of every day, Betty replenishes shelves with 100 toys (i.e., there are 100 toys for sale every day). If daily demand is less than 100, an inventory holding cost of $0.10 is charged for each toy that is not sold. However, if daily demand is greater than 100, a stockout occurs, and a shortage cost of $0.90 is charged for each unit of demand that cannot be satisfied. Unsatisfied demand is lost. (a) Set up intervals of random numbers that can be used to simulate daily demand. (b) Sketch a simulation table and perform a simulation for 9 days. Use the random numbers 0.76, 0.26, 0.77, 0.57, 0.87, 0.35, 0.50, 0.56, and 0.90 to generate simulated values for daily demand for those 9 days. Based on this sample of 9 days, what is the average daily net profit and service level…arrow_forwardSuppose cigarettes could be purchased for less in neighboring states because cigarette taxes are lower in those states. Group of answer choices Would effect the price elasticity of demand for cigarettes in New York more if the difference in taxes was greater. This would make the price elasticity of demand in New York higher. This would make the price elasticity of demand in New York lower. Would effect the price elasticity of demand for cigarettes in New York less if the difference in taxes was greater.arrow_forwardCameron sells premium steak at the local market. He has a lot of customers due to the promising taste and texture of his steak. One kilogram of his premium steak costs $80.50. However, it would only cost $68.50 per kilogram if a customer buys 3 kilograms and $58.50 per kilogram if a customer buys 5 kilograms. Cameron can supply 100 kilograms of premium steak in a day, but his supply only lasts for an hour and a half. Which of the following statements is true? With this pricing scheme, Cameron is extracting all the consumer surplus. Cameron is basing his pricing scheme on the maximum amount a customer is willing to pay for his premium steak. Cameron is using third degree price discrimination by charging different prices for different "blocks" of kilograms for his premium steak. Cameron receives a larger revenue and profts with this pricing scheme compared to charging a single lower price for larger quantities. None of the above are true.arrow_forward
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