Pillar Co makes decorative candles which are made from a special organic blend of beeswax, botanical wax and scented oils. Currently Pillar Co only sells its candles in its domestic market. The company has collected the data relating to sales of its 90 gram Honey Bee candle, which is very popular in Pillar Co's home country of Zedland. This pricing analysis is as follows: Price per unit Variable cost per unit (5) 5 Quantity sold ('000 units) 100 (5) 2.00 2.00 Fixed cost per unit (5) 4.00 4.17 4.35 6 96 92 2.00 88 2.00 4.55 84 4.76 2.00 2.00 10 80 5.00 Pillar Co is reviewing its pricing strategies and has decided to use the information relating to the Honey Bee candle to assess some of the company's possible pricing decisions. 7 8 9 Pillar Co plans to start exporting the Honey Bee candle. It is considering charging a lower price in its export markets than in its home market. Which TWO of the following conditions need to be true for this pricing strategy to be successful? The two markets must have different price elasticities of demand Export customers must not be able to resell the Honey Bee candle to home market consumers The marginal cost of supplying the export market must be lower than the home market The Honey Bee candle must have a short life cycle in the export market
Pillar Co makes decorative candles which are made from a special organic blend of beeswax, botanical wax and scented oils. Currently Pillar Co only sells its candles in its domestic market. The company has collected the data relating to sales of its 90 gram Honey Bee candle, which is very popular in Pillar Co's home country of Zedland. This pricing analysis is as follows: Price per unit Variable cost per unit (5) 5 Quantity sold ('000 units) 100 (5) 2.00 2.00 Fixed cost per unit (5) 4.00 4.17 4.35 6 96 92 2.00 88 2.00 4.55 84 4.76 2.00 2.00 10 80 5.00 Pillar Co is reviewing its pricing strategies and has decided to use the information relating to the Honey Bee candle to assess some of the company's possible pricing decisions. 7 8 9 Pillar Co plans to start exporting the Honey Bee candle. It is considering charging a lower price in its export markets than in its home market. Which TWO of the following conditions need to be true for this pricing strategy to be successful? The two markets must have different price elasticities of demand Export customers must not be able to resell the Honey Bee candle to home market consumers The marginal cost of supplying the export market must be lower than the home market The Honey Bee candle must have a short life cycle in the export market
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Pillar Co makes decorative candles which are made from a special organic blend of
beeswax, botanical wax and scented oils. Currently Pillar Co only sells its candles in
its domestic market.
The company has collected the data relating to sales of its 90 gram Honey Bee
candle, which is very popular in Pillar Co's home country of Zedland. This pricing
analysis is as follows:
Variable cost per unit
Price per unit
($)
Quantity sold
('000 units)
5
100
($)
2.00
2.00
Fixed cost per unit
($)
4.00
4.17
4.35
96
92
2.00
88
2.00
4.55
84
2.00
4.76
10
80
2.00
5.00
Pillar Co is reviewing its pricing strategies and has decided to use the information
relating to the Honey Bee candle to assess some of the company's possible pricing
decisions.
6
7
8
9
Elag for Review
Pillar Co plans to start exporting the Honey Bee candle. It is considering charging a lower price in its
export markets than in its home market.
Which TWO of the following conditions need to be true for this pricing strategy to be successful?
The two markets must have different price elasticities of demand
Export customers must not be able to resell the Honey Bee candle to home market consumers
The marginal cost of supplying the export market must be lower than the home market
The Honey Bee candle must have a short life cycle in the export market
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