(Table: Demand for Breakfast Cereal) the Table Shows the Market

question 61

Essay

(Table: Demand for Breakfast Cereal) The table shows the market demand schedule for breakfast cereal.Suppose that the marginal cost of producing boxes of cereal is $0.a) If General Mills is the sole producer of breakfast cereal, how many boxes of cereal will the firm produce, what price will be charged, and how much revenue will be earned?
b) Now assume that Kellogg enters the market for breakfast cereal, and the breakfast cereal industry is now a duopoly with two equal-sized firms.If these firms agree to split the monopoly output equally, how much revenue will each firm earn under the agreement?
c) If General Mills can cheat on this agreement by producing 50 million more boxes of cereal without punishment, will it? Analyze the price effect and quantity effect of producing 1 million more boxes to justify your conclusion.

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