(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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