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You are the manager of Coca-Cola and use high fructose corn syrup (HFCS) as soft drink...

You are the manager of Coca-Cola and use high fructose corn syrup (HFCS) as soft drink sweetener because it is cheaper than sugar. Explain why you would bargain on a price of a shipment of Q-tons of HFCS with Archer-Daniels Midland Company (ADM). Use a graph to explain how to determine your preferred price. What would be the maximum discount you could get on this deal?

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Answer #1

The manager of Coca Cola will bargain for increasing quantity of HCFS with ADM to achieve economies of scale or increasing returns to scale.

The seller ADM shall sell HCFS as product at cost where its Marginal Cost equals Marginal Revenues and hence profit will maximise for ADM. However by and large the preferred price shall be determined by type of market structure the seller operates in as shown below.

PRICE PRICE Po pima PERFECT

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