Use the Following to Answer Question

question 84

Essay

Use the following to answer question:
-(Table: Demand for Breakfast Cereal) Look at the table Demand for Breakfast Cereal. Suppose that the marginal cost of producing cereal is zero.
A) If General Mills is the sole producer of breakfast cereal, how many boxes will the firm produce, what price will be charged, and how much revenue will be earned?
B) Now assume that Kellogg enters the market, and the 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 for General Mills of producing 1 million more boxes.

• A) If General Mills is the sole producer of breakfast cereal, how many boxes will the firm produce, what price will be charged, and how much revenue will be earned?
• B) Now assume that Kellogg enters the market, and the 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 for General Mills of producing 1 million more boxes.

---

Definitions:

Portfolio

A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents held by an investor or institution.

Standard Deviation

A measure of the dispersion or variability in a set of values, indicating how much the values differ from the mean of the set.

Expected Return

The anticipated return on an investment, taking into account the probabilities of each possible outcome.

Independent

Free from external control and constraint, or in finance, referring to analysis or advice that is unbiased by conflicts of interest.