Breakfast cereal comes in different size boxes. The large boxes cost more than the small boxes, but on a per unit basis, they cost less. What is this likely due to?
A) increasing returns to scale
B) price discrimination
C) marginal cost pricing
D) positive externalities

Question

Quizplus · Accepted Answer

This is likely due to price discrimination. The company charges more for the convenience of buying in bulk, but reduces the per unit price to incentivize consumers to buy the larger boxes. This allows the company to capture revenue from both price-sensitive consumers who may opt for the smaller boxes, as well as consumers who place a higher value on bulk purchasing.

Breakfast Cereal Comes in Different Size Boxes