P.P T.V station is considering selling promotional dvds. It can have the DVDs produced by Firm A and Firm B. Firm A will charge a set up fee of $1200 plus $2.00 for each DVD, while Firm B has no set up fee and will charge $4.00 for each DVD. The station estimates its demand for DVDs to be: Q=1,600-200P; P is price ($) and Q is number of DVDs.
1. Suppose the station decides to give away the DVDs, how many DVDs should it order and from which supplier?
2. Suppose the station wants to maximize its profit, what price should it charge and how many DVDs should it order from each supplier?