A movie studio sells the latest movie on DVD to Blockbuster at $11 per DVD. The marginal production cost for the movie studio is $2 per DVD. Blockbuster prices each DVD at $23 to its customers. DVD s are kept on the regular rack for a one-month period, after which they are discounted down to $4. Blockbuster places a single order for DVDs. Their current forecast is that sales will be normally distributed, with a mean of 100,000 and a standard deviation of 40,000.
a. How many DVDs should Blockbuster order?
b. What is its expected profit?
c. What is the profit that the studio makes given Blockbuster’s actions?
Please show the calculations...