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Find profit maximizing order quantity

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Reference no: EM1374373

A television station is planning the sale of promotional dvds. It can have the dvds manufactured by one of two suppliers. Supplier A will charge the station a set up fees of $1200 plus $2 for each dvds; supplier b has no set-up fee and will charge $4 per dvd. The station estimates its demand for the dvds to be given by Q = 1600 - 200P, where p is the price in dollars and Q is the number of dvds. (the price equation is P = 8 - Q/200.)

[A] Assume that the station plans to give away the videos. How many dvds should it order? From which supplier?

[B] Assume instead that the station seeks to maximize its profit from sales of the dvds. What price should it charge? How many dvds should it order from which supplier? (Suggestion: 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.)

Reference no: EM1374373

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