A ready-to-eat cereal manufacturer faces two types of consumers, adults and children, having the following schedule of gross surpluses for each additional unit of cereal consumed.

Cereal costs $0.15 per ounce to produce. The manufacturer has full information about types because adults hate sweet children's cereal and children hate the fiber-filled adult cereal. What is the optimal bundle to offer adults and two children in this full-informationsetting?

Transcribed Image Text:

MARGINAL SURPLUS THIS OUNCE PROVIDES ADULTS IN CENTS MARGINAL SURPLUS THIS OUNCE PRO VIDES CHILDREN IN CENTS OUNCE OF CEREAL First 32 24 Third Fourth Fifth Sixth Seventh 12