Problem 2. You are the video acquisitions officer for your residence hall. The o

Question

Problem 2. You are the video acquisitions officer for your residence hall. The other officers of your hall will tell you how many videos they would like to rent during the year. Your job is to find you have found that there are three rental plans from which you can choose. Plan A: Pay $3 per video, with no additional fees. Plan B: Join the Frequent Viewer Club. Here you pay a yearly mem- bership fee of $50, with an additional charge of $2 for each video rented. Plan C: Join the Very Frequent Viewer Club. In this club you pay a yearly membership fee of $150, with an additional charge of $1 for each video rented. a) Which plan would you select if your instructions are to rent 75 movies a year at the lowest possible cost? b) Which plan would you select if your instructions are to rent 125 movies a year at the lowest possible cost? Explain.

Explanation / Answer

a) We calculate the costs of various plans for renting out 75 videos a year

Plan A : cost = 75*3 = $225

Plan B : cost = 75*2 + 50 = $200

Plan C : 75*1 + 150 = $225

Clearly in this case we will opt for Plan B

---------------

b) Similarly, we calculate the cost of renting 125 videos under various plans

Plan A : cost = 125*3 = $375

Plan B: cost = 125*2 + 50 = $ 300

Plan C : cost = 125*1 + 150 = $ 275

Clearly in this case we will opt for Plan C

--------------

c) In the above exercise the number of videos rented is exogenous as it is not determined itself in the exercise. The plans are to be chosen as per the number of videos to be rented and not the other way round.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.