Return to the ready-to-eat cereal example from the previous question. Now assume that there is only one kind of cereal,so the manufacturer cannot distinguish between types of consumer (adults vs.children,of which suppose there are equal numbers in the market). What is the optimal menu of cereal boxes?
A)a 3 ounce box (which adults will buy) sold for 48 cents; a 4 ounce box (which children will buy) sold for $1.12.
B)a 3 ounce box (which adults will buy) sold for 48 cents; a 4 ounce box (which children will buy) sold for 64 cents.
C)a 2 ounce box (which adults will buy) sold for 36 cents; a 4 ounce box (which children will buy) sold for 76 cents.
D)No menu; the manufacturer is better off just selling a 5 ounce box for $1.12,which is only purchased by children.

Question

Quizplus · Accepted Answer

Given there's only one kind of cereal and the manufacturer cannot distinguish between types of consumers, the optimal strategy would be to offer a product that maximizes profit while catering to the segment willing to pay the most. Selling a single 5 ounce box at a higher price targets children (who are assumed to have a higher willingness to pay or demand for larger quantities) and simplifies the product line, potentially reducing complexity and costs associated with offering multiple options.

Return to the Ready-To-Eat Cereal Example from the Previous Question