The following regression is the demand for free-range chicken, which was estimated from (actual) nationwide data provided by a large UK retailer over a two-year period: Qx = 229,821 38,121 Px + 28,826 Py where: Qx = quantity of free-range chicken sold (number of units); Px = average price of free-range chicken (); and Py = average price of standard non-free-range chicken (). The average for these variables in these two years are: = 117,735; = 5.56; and = 3.46.

If marginal cost MC = 2.5 (assume this is constant), calculate the profit-maximising price and the revenue maximising price. In doing so, remember that TRx = Qx Px, and from the demand equation we obtain = 229,821 38,121 1 38,121Q + 28,826 38,121 (note that is the average value of Py). How do these prices compare with the current price?