The Timex Group, a large multinational watchmaker, has its headquarters in the Netherlands. It has subsidiaries in many countries, including the Timex Group USA and TMX Philippines, Inc. One particular type of specialty watch is produced in the Philippines for export to the Timex Group USA Suppose the inverse demand curve for this watch in the United States is p=130-20. where p is measured in dollars and Q is measured in thousands of watches per week. These watches are produced at a constant marginal cost of $10 per watch by TMX Philippines. Timex USA treats the transfer price charged by TMX Philippines as ts marginal cost. What transfer price would maximize the profit of TMX Philippines? (Hint For any given transfer price the Timex Group USA will demand some quantity of watches. This relationship determines the demand facing TMX Philippines) I TMX Philippines maximies their own profit, then they will charge a transfer price of $ (Enter your response as a whole number)

The Timex Group, a large multinational watchmaker, has its headquarters in the Netherlands. It has subsidiaries in many countries, including the Timex Group USA and TMX Philippines, Inc. One particular type of specialty watch is produced in the Philippines for export to the Timex Group USA Suppose the inverse demand curve for this watch in the United States is p=130-20. where p is measured in dollars and Q is measured in thousands of watches per week. These watches are produced at a constant marginal cost of $10 per watch by TMX Philippines. Timex USA treats the transfer price charged by TMX Philippines as ts marginal cost. What transfer price would maximize the profit of TMX Philippines? (Hint For any given transfer price the Timex Group USA will demand some quantity of watches. This relationship determines the demand facing TMX Philippines) I TMX Philippines maximies their own profit, then they will charge a transfer price of $ (Enter your response as a whole number)

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter5: Income And Substitution Effects

Section: Chapter Questions

Problem 5.13P

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An analyst for FoodMax estimates that the demand for its Brand X potato chips is given by ln QdX = 12.14 – 2.8 ln PX + 3.4PY + 0.7 ln 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 AX is FoodMax’s level of advertising on Brand X potato chips. Last year, FoodMax sold 7 million bags of Brand X chips and spent $0.42 million on advertising. Its plant lease is $2.1 million (this annual contract includes utilities) and its depreciation charge for capital equipment was $2.8 million; payments to employees (all of whom earn annual salaries) were $0.8 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 $2.8 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…
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