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JB-Hi-Fi and other movie DVD retailers, including online vendors like Ebay employ a two-step pricing policy. During the first six months following a theatrical release,
JB-Hi-Fi and other movie DVD retailers, including online vendors like Ebay employ a two-step pricing policy. During the first six months following a theatrical release, movie DVD buyers are willing to pay a premium for new releases. The total revenue relations for a typical newly released movie DVD are given by the following relations: TR = $ 28 Q - $0.0045Q- Total cost (TC) for production and distribution are: TC = $ 4,500 + $ 3 Q + $ 0.0005Q2 I where Q is in thousands of units (DVDs). Because units are in thousands, both total revenues and total costs are in thousands of dollars. Total costs include a normal profit. A. Use the marginal revenue and marginal cost relations to calculate DVD output, price, and economic profits at the profit-maximizing activity level for new releases.where Q is in thousands of units (DVDs). Because units are in thousands, both total revenues and total costs are in thousands of dollars. Total costs include a normal profit. A. Use the marginal revenue and marginal cost relations to calculate DVD output, price, and economic profits at the profit-maximizing activity level for new releases. B. After six months, price-sensitive DVD buyers appear willing to pay upto $ 6 per DVD, but no more no more. Calculate the equilibrium price-output activity level in this situation. Is this a stable equilibrium
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