1.Policy makers concerned with the increasing number of overweight consumers have long complained about the pricing of soda at fast food restaurants. In most cases, a small soda (usually around 16 ounces) sells for a couple dollars. For just a few cents more, one could purchase a drink that was double that size and obtain a much better deal. (10 points total)

a.Why would fast food chains offer such steep discounts on larger sodas? Please use appropriate terminology from class to explain what type of preferences consumers would be using in this scenario (be specific!).

b.In one extreme case, a major fast food chain has offered all sizes of drinks for the same price. How could this be profitable? Please also explain how this can be profitable for businesses. Again, use appropriate terminology from class.