An analyst for FoodMax estimates that the demand for its "Brand X" potato chips is given by: In Qxd=10.34-3.2 In Px + 4Py+1.5 In Ax where QX and Px are the respective quantity and price of a four-ounce bag of Brand X potato chips, Py is the price of a six-ounce bag sold by its only competitor, and Axis FoodMax's level of advertising on brand X potato chips. Last year, FoodMax sold 5 million bags of Brand X chips and spent $0.25 million on advertising. Its plant lease is $2.5 million (this annual contract includes utilities) and its depreciation charge for capital equipment was $2.5 million; payments to employees (all of whom earn annual salaries) were $0.5 million. The only other costs associated with manufacturing and distributing Brand X chips are the costs of raw potatoes, peanut oil, and bags; last year FoodMax spent $2.5 million on these items, which were purchased in competitive input markets. Based on this information, what is the profit-maximizing price for a bag of Brand X potato chips? Instructions: Enter your response rounded to the nearest penny (two decimal places). +A
An analyst for FoodMax estimates that the demand for its "Brand X" potato chips is given by: In Qxd=10.34-3.2 In Px + 4Py+1.5 In Ax where QX and Px are the respective quantity and price of a four-ounce bag of Brand X potato chips, Py is the price of a six-ounce bag sold by its only competitor, and Axis FoodMax's level of advertising on brand X potato chips. Last year, FoodMax sold 5 million bags of Brand X chips and spent $0.25 million on advertising. Its plant lease is $2.5 million (this annual contract includes utilities) and its depreciation charge for capital equipment was $2.5 million; payments to employees (all of whom earn annual salaries) were $0.5 million. The only other costs associated with manufacturing and distributing Brand X chips are the costs of raw potatoes, peanut oil, and bags; last year FoodMax spent $2.5 million on these items, which were purchased in competitive input markets. Based on this information, what is the profit-maximizing price for a bag of Brand X potato chips? Instructions: Enter your response rounded to the nearest penny (two decimal places). +A
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:An analyst for FoodMax estimates that the demand for its "Brand X" potato chips is given by:
InQxd 10.34 3.2 In Px+4Py+ 1.5 In Ax
where QX and Px are the respective quantity and price of a four-ounce bag of Brand X potato chips, Py is the price of a six-ounce bag
sold by its only competitor, and Axis FoodMax's level of advertising on brand X potato chips.
Last year, FoodMax sold 5 million bags of Brand X chips and spent $0.25 million on advertising. Its plant lease is $2.5 million (this
annual contract includes utilities) and its depreciation charge for capital equipment was $2.5 million; payments to employees (all of
whom earn annual salaries) were $0.5 million. The only other costs associated with manufacturing and distributing Brand X chips are
the costs of raw potatoes, peanut oil, and bags; last year FoodMax spent $2.5 million on these items, which were purchased in
competitive input markets.
Based on this information, what is the profit-maximizing price for a bag of Brand X potato chips?
Instructions: Enter your response rounded to the nearest penny (two decimal places).
$
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