Specialty Cakes: Imagine that you're planning an aftersymphony fundraising party, and you need a lifesize grand piano cake. Or, you are a developer proposing a new shopping center to a group of investors, and you want to serve a cake shaped like an architectural rendition of the center.
Is this impossible? No, you just need to contact Cecilia Villaveces Cakes. She actually built a life-size grand piano for a gala in Macon, Georgia. You can expect to pay anywhere from $75 to $10,000 for one of Cecilia's artistic creations, depending on complexity of design and size. She uses only the best ingredients, and no two cakes are ever quite alike.
- Refer to Specialty Cakes. Although many factors determine the prices charged by Cecilia Villaveces Cakes, the two primary determinants are:
a. costs of manufacturing and distribution costs.
b. stage of the product life cycle and costs to the consumers.
c. the demand for the good and the cost to the seller.
d. demand by the consumer and perceived quality.
e. distribution and promotion strategies used by the cake maker.
ANSWER: c
- Refer to Specialty Cakes. Many party planners in the Southeast will only use Cecilia Villaveces Cakes at their parties--no matter what the price is. They know that Cecilia's cakes can make a party a success. Moreover, the cakes are what people remember most about the parties. From this description, you should assume Cecilia Villaveces Cakes have a(n):
a. elastic demand.
b. unitary elasticity.
c. inelastic supply.
d. inelastic demand.
e. elastic supply.
ANSWER: d
- Refer to Specialty Cakes. Which of the following is the BEST example of a fixed cost for Cecilia Villaveces Cakes?
a. Eggs, butter, sugar
b. Delivery costs
c. Part-time employees
d. Electricity consumption
e. Food preparation licenses
ANSWER: e
- Refer to Specialty Cakes. Which of the following is the BEST example of a variable cost for Cecilia Villaveces Cakes?
a. Life insurance on Cecilia
b. Flour and sugar
c. Ovens used for cooking cakes
d. Business licenses
e. Interest payments to the bank
ANSWER: b
- Refer to Specialty Cakes. To set the price of her cakes, Cecilia simply doubles her costs, which often include several hours of labor and expensive raw materials. This method of price setting is called:
a. mark-on pricing.
b. premium pricing.
c. keystoning.
d. add-on pricing.
e. superimposed pricing.
ANSWER: c
- Refer to Specialty Cakes. There are many occasions for which people may need to buy a cake, but most people do not have the time or interest to learn about cakes and their bakers. These people who do not know about the quality of the Cecilia Villaveces Cakes might choose them because they:
a. equate price and quality.
b. know cakes are in the mature stage of their product life cycle.
c. realize that this is a monopolistic industry.
d. believe that there is not a relationship between price and quality.
e. desire value-added services.
ANSWER: a