I am writing a Lyx document (1.1.6fix3) which includes many jpeg images.  To
conserve time and disk space, I do not want to go through the process of
converting the jpeg images to .eps files.  Because pdflatex handles jpeg
files, I am assuming things should be straightforward.

However, I notice curious behaviour from Lyx whenever I go File -> Export ->
LaTeX.  In the tex file that gets produced, all my references to jpeg files,
eg. figure.jpg, are now references to eps files, eg. figure.eps.  I also
notice that when I go View -> PDF(pdflatex), Lyx inserts errors wherever I
have a figure with a jpeg image.  The error says something like "Unknown
graphics extension: .eps. \includegraphics{figure.eps}".

I don't understand why Lyx is changing all my jpeg references to eps.  I
realize that if I export a latex file, manually change .eps to .jpg, and run
pdflatex on the edited file from the command line, everything works fine.
It would just be much nicer if I could simply pull down the View menu and
generate the pdf document from within Lyx.  Could anyone explain how to stop
Lyx from changing all the jpeg references?

Many thanks!

Martin 

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