Table 14-6

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 14-6 to answer the following question and assume throughout that Sturdy Homes believes that My Haven will match any price it sets.
-Refer to Table 14-6.What price will Sturdy Homes charge and what profit does Sturdy Homes expect to make?

Question

Table 14-6
  
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 14-6 to answer the following question and assume throughout that Sturdy Homes believes that My Haven will match any price it sets.
-Refer to Table 14-6.What price will Sturdy Homes charge and what profit does Sturdy Homes expect to make?

Quizplus · Accepted Answer

Based on Table 14-6, Sturdy Homes should charge a price of $10,000 in order to maximize profit. At this price, the expected profit for Sturdy Homes is $5 million. This is higher than the expected profit at any other price point, including the maximum price of $12,000.

Table 14-6 There Are Two Mobile Home Manufacturers in Nevada, Sturdy Homes