The NFL Network broadcasts special programs created by NFL Films. The firms are independently owned and operated. NFL Films sells only to the NFL Network. The NFL Network then licences its broadcasts to international cable networks to be shown worldwide.

The Network's demand for films is PN = 400,000 - 200Q. The Network pays NFL Films a price PF for each film and adds $100,000 for each film to get it ready to air. It also has FCN = $200,000.

NFL Films has MCF = $260,000 and FCF = $100,000. Since it sells only to the NFL Network, its demand is the same as the Network's demand and so QN = QF = Q.

Suppose the two firms vertically integrate. What transfer price would result in the NFL Network earning zero in profit?

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