Table 14-3 There are two mobile home manufacturers in Nevada,Sturdy Homes (S)and My Haven (M).Sturdy Homes has been in the market for a long time and must now compete with newcomer,My Haven.Suppose that Sturdy Homes believes that My Haven will match any price it sets.Use Table 14-3 to answer the following question and assume throughout that Sturdy Homes believes that My Haven will match any price it sets.
-Refer to Table 14-3.What price will Sturdy Homes charge and what profit does Sturdy Homes expect to make?

Question

Table 14-3  There are two mobile home manufacturers in Nevada,Sturdy Homes (S)and My Haven (M).Sturdy Homes has been in the market for a long time and must now compete with newcomer,My Haven.Suppose that Sturdy Homes believes that My Haven will match any price it sets.Use Table 14-3 to answer the following question and assume throughout that Sturdy Homes believes that My Haven will match any price it sets.
-Refer to Table 14-3.What price will Sturdy Homes charge and what profit does Sturdy Homes expect to make?

Quizplus · Accepted Answer

Sturdy Homes will charge a price of $10,000 as it is the highest price that will result in positive profit. At this price, Sturdy Homes expects to make a profit of $5 million, which is the highest among all the possible price options. Charging a lower price would result in lower profit and charging a higher price would result in negative profit. Therefore, the best choice for Sturdy Homes is to charge $10,000.

Table 14-3 There Are Two Mobile Home Manufacturers in Nevada,Sturdy