A television station is considering the sale of promotional videos. It can have the

A television station is considering the sale of promotional videos. It can have the

6. A television station is considering the sale of promotional videos. It can have the videos produced by one of two suppliers. Supplier A will chargethe station a set-up fee of $1,200 plus $2 for each DVD; supplier B has noset-up fee and will charge $4 per DVD. The station estimates its demandfor the DVDs to be given by Q   1,600   200P, where P is the price indollars and Q is the number of DVDs. (The price equation is P   8  Q/200.)

a. Suppose the station plans to give away the videos. How many DVDsshould it order? From which supplier?

b. Suppose instead that the station seeks to maximize its profit from salesof the DVDs. What price should it charge? How many DVDs should itorder from which supplier? (Hint: Solve two separate problems, onewith supplier A and one with supplier B, and then compare profits. Ineach case, apply the MR   MC rule.)
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