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 $1.8
million. In your market, you compete against two other dealers, and
the market-level price elasticity of demand for midsized Honda
automobiles is -1.2. In each of the last five years, your
dealership has sold more midsized automobiles than any other Honda
dealership in the nation. This entitled your dealership to an
additional 35 percent off the manufacturer’s suggested retail price
(MSRP) in each year. Taking this into account, your marginal cost
of a midsized automobile is $10,000.
What price should you charge for a midsized automobile if you
expect to maintain your record sales?
Instruction: Enter your response rounded to two
decimal places.
Answer :
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