Assignment 3: A television station is considering the sale....

Assignment 3: A television station is considering the sale of promotional DVDs. It can have the DVDs produced by one of two suppliers. Supplier A will charge the station a set-up fee of $1,200 plus $2 for each DVDs; supplier B has the no set-up fee and will charge $4 per DVD. The station estimates its demand for the DVDs to be given by Q = 1,600 – 200P, where P is the price in dollars and Q is the number of DVDs. (The price equation is P = 8 – Q / 200).


·         Suppose the station plans to give away the videos. How many DVDs should it order? From which supplier?

·         Suppose instead that the stations seek to maximize its profits from sales of the DVDs. What price should it charge? How many DVDs should it order from which supplier?

·         Hint: Solve two separate problems, one with supplier A and one with supplier B, and then compare profits. In each case, apply the MR = MC rule.


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