Question: A TV set is considering sale of DVDs. supplier A will charge $1200 set up fee plus $2 each DVDs. Supplier B will charge $4 per DVD wit no set up fee. the situation estimates its demand for DVDs to be given at Q=1600-200p, where P is the price in dollars and q is # of DVDs.

A) Suppose the station plans to give away videos, how many DVDs should it order? from which supplier?

B) Suppose instead that the station seeks to maximize its profit from sales of dvds. what price should it charge? how many DVDs should it order from which supplier?(hint: solve 2 separate problems, one with supplier A and one with B and then compare profits. in each case, apply the MR=MC rule.).