(Solution Download) MC=MR

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


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.)


a. Suppose the station plans to give away the videos. How many DVDs


should it order? From which supplier?


52 Chapter 2 Optimal Decisions Using Marginal Analysis Summary 53


b. Suppose instead that the station seeks to maximize its profit from sales


of the DVDs. What price should it charge? How many DVDsshould 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.)


(Samuelson, William. Managerial Economics, 6th Edition. John Wiley & Sons, 012009. pp. 52 - 53).


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