📐 SAT
📝 ACT
🎓 AP Exams
About Contact Blog Privacy Policy

AP Business with Personal Finance: Pricing Strategy Drill (Drill 12)

Drill 12 ·

0 / 5
0/5 correct

Nice work!

Review your answers above to learn from any mistakes.

← More Drills
←
Previous drill
Drill 11
Next drill
Drill 13
→

About This Drill

AP Business with Personal Finance: Pricing Strategy Drill (Drill 12) is a practice drill. It contains 5 original questions created by Brian Stewart, a Barron's test prep author with over 20 years of tutoring experience.

A pricing strategy drill set covering skimming, penetration, and markup for AP Business with Personal Finance; uses an invented company and original figures.

Passage

Hollowmere Candle Co. is about to launch a new hand-poured candle and is choosing a launch price. Each candle costs the company $6.00 to make. The marketing team has estimated how many candles it would sell in the first year at three different launch prices.

Hollowmere Candle Co.: Launch Price Options (first-year estimates)

OptionLaunch price per candleEstimated first-year units
Option 1$24.003,000
Option 2$18.005,000
Option 3$12.009,000

Rounding: report all dollar amounts to the nearest whole dollar.

Questions in This Drill

  1. How many candles does the company estimate it would sell in the first year at a launch price of $18.00?
  2. Option 3 sets a low launch price of $12.00 to attract as many buyers as possible and build market share quickly. Which pricing strategy does Option 3 best illustrate?
  3. What is the estimated first-year revenue under Option 1 (launch price times estimated units)?
  4. Suppose Hollowmere's goal at launch is to earn the highest margin per candle from the customers most eager to buy early. Which reasoning best explains why a skimming price (Option 1) fits that goal?
  5. Hollowmere's owner decides the single most important goal is to maximize first-year revenue. Based on the table, which launch price should the owner choose?