Smelly Fruit: At first glance, there is little to like about the durian. The durian is a fruit popular in Thailand that is spiky outside and stinky on the inside.
When confronted with the durian for the first time, the Wall Street Journal recently reported that westerners often describe its distinctive sulphurous smell with words like stinky socks and manure.
However, the durian is so popular in Thailand that one variety of the durian fruit, called the Kan Yao, has been selling for as high as $200. Even at that price, supply of the Kan Yao cannot keep up with demand. There are approximately 30 varieties of the durian grown in Thailand, with the most plentiful selling in the $15 range. The yellow flesh of the durian, the part you eat, has very powerful smell but possesses a sweet, nutty taste that Thais cannot seem to get enough of at any price.
- Refer to Smelly Fruit. Suppose that a Thai farmer sells ten Kan Yao durians in the marketplace at the going rate of $200 each. If it cost a Thai farmer $125 to produce and market the Kan Yao durian that she has sold, the difference between these two numbers ($75), times the number sold (ten), represents the farmer's:
a. ROI
b. revenue
c. profit
d. returns
e. COGS
ANSWER: c
- Refer to Smelly Fruit. Suppose that you have decided to buy land in Thailand and become a durian producer. You see that the customary price for a Kan Yao is $200, so that is the price you decide to charge for your durian crop. This suggests you are using a ___ approach to setting your price.
a. profit maximization
b. market share
c. return on investment (ROI)
d. sales maximization
e. status quo
ANSWER: e
- Refer to Smelly Fruit. At $200 per Kan Yao, demand for the fruit appears to be higher than supply. Suppose that at a price of $225, the amount demanded exactly meets the amount farmers are willing and able to supply. In this case, the $225 price would be considered the ___ price.
a. price equilibrium
b. sales maximization
c. profit maximization
d. ROI maximization
e. yield management
ANSWER: a
- Refer to Smelly Fruit. Over the past two years, the price for Kan Yao durian fruit has increased by 50 percent. If the amount sold has remained almost constant, we would say that demand is:
a. elastic
b. inelastic
c. unitary
d. highly elastic
e. moderately elastic
ANSWER: b
- Refer to Smelly Fruit. The durian fruit is a unique product. To many people in Thailand, no other fruit tastes or smells anything like the durian. Its uniqueness, in the eyes of the customer, would tend to have which of the following?
a. It would have little effect.
b. It would tend to make the durian more price elastic.
c. It would tend to make the durian more price inelastic.
d. It would tend to raise the price in comparison to purchasing power.
e. It would tend to impact the durian's stage in the PLC.
ANSWER: c