1. Your software company produces high-end drafting software for architects and other design professionals, and you have a rival that produces a less functional program with a much lower price. If your company buys the rival firm, what should you do to protect your high-end product profits?
    A.Decrease the price of both products, and offer a bigger discount on the high-end product
    B.Raise prices for both programs, but raise the low-end product price by more
    C.Decrease the price of the high-end program and don’t change the price of the low-end program
    D.Raise price for both programs, but raise the high-end product price by more


  1. Edgewell Products owned the Schick and Wilkinson brands of personal care razors, and they recently purchased the Harry’s brand of razors. If all of these products are substitutes for one another, then Edgewell should
    A.Increase the price of Schick and Wilkinson and reduce the Harry’s price
    B.Raise the price of Harry’s and reduce the prices for Schick and Wilkinson
    C.Reduce the price of all three brands
    D.Raise the price of all three brands


  1. Suppose Uber buys Lyft, they keep both brands, and the combined firm does not want to change pricing for the ride-sharing services. What can they do to prevent one service from cannibalizing the business of the other brand.
    A.Erase all brand names from the phone apps and cars so customers don’t know one brand from another
    B.Start a third ride-sharing brand and have it charge really high prices
    C.Offer free rides to all customers and hope for profits to appear
    D.Reposition one of the services as a food and parcel delivery service and keep the other brand for ride sharing


  1. Suppose you own a pizza restaurant, and your manager decides to run Google ads that state how much better your pizza is than the stuff they sell at three other local restaurants. Unfortunately, most of your customers had not heard of these other places, so they now know there are substitutes for your pizza and the demand for your pizza becomes more elastic. What should you do?
    A.Keep the prices and manager the same
    B.Reduce prices and fire the manager
    C.You don’t know what to do, so you ask Google for an answer
    D.Raise prices and promote the manager


  1. Your firm sells cases of nutrient-fortified bottled waters for $15, and the demand elasticity is -3 with a marginal cost of $10 per case. Suppose your marginal cost increases to $12 per case due to new taxes on plastic water bottles. What is your new optimal price?
    A.$21 per case
    B.$24 per case
    C.$18 per case
    D.$15 per case

Business Finance

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