1. Sasha is a manager for an ice cream company. The company recently developed a delicious low-calorie version of its product. At current volumes, the per gallon cost is the same to produce this new line as to produce its traditional ice cream and it is produced on the same equipment. The company could improve profitability by:
a. setting the price for this product line higher than its typical offering because of the increased perceived value by customers.
b. marketing it as better tasting than the existing ice cream line.
c. eliminating its other product offering entirely and focusing only on this new low-calorie option.
d. setting the price for this product at less than your traditional ice cream because it has fewer calories and a smaller audience.
2. A value chain includes:
a. a group of functional areas that are unique to each firm and can only be performed by that company.
b. guidance for setting prices and maximizing profitability.
c. a model for evaluating the quality of a company's resources and identifying distinctive competencies.
d. primary activities in the design, creation and delivery of a product and support activities.
3. A small brewery is working to determine the appropriate price for some of its products to achieve competitive advantage and greater profitability. In the past, the brewery releases a summer ale at the same price as its regular year-round beer. In the last three summers, the company sold out of the beer by early August. If the company raises its summer ale price and it continues to sell at a steady pace, that is a sign that:
a. the company produces less of its summer ale than of its regular beer and therefore must increase prices on it to maintain profitability.
b. the customer is assigning a greater value to the summer ale and the company can increase its price to gain profitability.
c. the cost of the basic factors of production has increased forcing the company to increase its price for all of its products.
d. the company must address the cost of its inputs to improve profitability.