Imagine the potato chip market is made up of two businesses: Jay's potato chips and Leah's stackable potato chips. Each company has just come up with an idea for a new flavour of chip, which it would sell for $3 a bag. Assume that the marginal cost for each new bag of chips is a constant $1 and the only fixed cost is advertising. Each company knows that if it spends $5 million on advertising, it will get 2 million consumers to try its new product. Jay's potato chips' market research suggests that its new flavour does not have any staying power in the market. Even though it could get 2 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Leah's stackable potato chips' research suggests that its product is very good, and consumers who try the product will continue to be buyers over the ensuing year. On the basis of its market research, Leah's stackable potato chips estimates that its initial 2 million customers will buy one unit of the product each month in the coming year, for a total of 24 million units. Given this scenario we should expect of from this new product. to advertise and to earn total profit Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Leah's stackable potato chips; $52 million Leah's stackable potato chips; $48 million
Imagine the potato chip market is made up of two businesses: Jay's potato chips and Leah's stackable potato chips. Each company has just come up with an idea for a new flavour of chip, which it would sell for $3 a bag. Assume that the marginal cost for each new bag of chips is a constant $1 and the only fixed cost is advertising. Each company knows that if it spends $5 million on advertising, it will get 2 million consumers to try its new product. Jay's potato chips' market research suggests that its new flavour does not have any staying power in the market. Even though it could get 2 million consumers to buy the product once, it is unlikely that they will continue to buy the product in the future. Leah's stackable potato chips' research suggests that its product is very good, and consumers who try the product will continue to be buyers over the ensuing year. On the basis of its market research, Leah's stackable potato chips estimates that its initial 2 million customers will buy one unit of the product each month in the coming year, for a total of 24 million units. Given this scenario we should expect of from this new product. to advertise and to earn total profit Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Leah's stackable potato chips; $52 million Leah's stackable potato chips; $48 million
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:EOC 17.07
Imagine the potato chip market is made up of two businesses: Jay's potato chips
and Leah's stackable potato chips. Each company has just come up with an idea
for a new flavour of chip, which it would sell for $3 a bag. Assume that the
marginal cost for each new bag of chips is a constant $1 and the only fixed cost is
advertising. Each company knows that if it spends $5 million on advertising, it
will get 2 million consumers to try its new product. Jay's potato chips' market
research suggests that its new flavour does not have any staying power in the
market. Even though it could get 2 million consumers to buy the product once, it
is unlikely that they will continue to buy the product in the future. Leah's
stackable potato chips' research suggests that its product is very good, and
consumers who try the product will continue to be buyers over the ensuing year.
On the basis of its market research, Leah's stackable potato chips estimates that
its initial 2 million customers will buy one unit of the product each month in the
coming year, for a total of 24 million units.
Given this scenario we should expect.
to advertise and to earn total profit
of
from this new product.
Select an answer and submit, For keyboard navigation, use the up/down arrow keys to select
an answer.
a
Leah's stackable potato chips; $52 million
b
Leah's stackable potato chips; $48 million
Leah's stackable potato chips; $43 million
d.
both businesses; $78 million
e
both businesses; $48 million
f
both businesses; $52 million
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