An analyst for FoodMax estimates that the demand for its "Brand X" potato chips is given by: Inox. -12.59 -3 In Px+ 3.8Py+ 1.2 In Ax where Qx and Px are the respective quantity and price of a four-ounce bag of Brand X potato chips, Pyis 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 6 million bags of Brand X chips and spent $0.39 million on advertising. Its plant lease is $2.3 million (this annual contract includes utilities) and its depreciation charge for capital equipment was $2.9 million; payments to employees (all of whom earn annual salaries) were $0.6 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 $3.3 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).
An analyst for FoodMax estimates that the demand for its "Brand X" potato chips is given by: Inox. -12.59 -3 In Px+ 3.8Py+ 1.2 In Ax where Qx and Px are the respective quantity and price of a four-ounce bag of Brand X potato chips, Pyis 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 6 million bags of Brand X chips and spent $0.39 million on advertising. Its plant lease is $2.3 million (this annual contract includes utilities) and its depreciation charge for capital equipment was $2.9 million; payments to employees (all of whom earn annual salaries) were $0.6 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 $3.3 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).
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:
Inax= 12.59 - 3 In Px+ 3.8Py+ 1.2 in Ax
where Qx and Px are the respective quantity and price of a four-ounce bag of Brand X potato chips, Pyis 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 6 million bags of Brand X chips and spent $0.39 million on advertising. Its plant lease is $2.3 million (this
annual contract includes utilities) and its depreciation charge for capital equipment was $2.9 million; payments to employees (all of
whom earn annual salaries) were $0.6 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 $3.3 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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