Lesson 7 -Quiz

1. Minimum wage is part of ILO (International Labour Organisation) and respective governments’ effort on fixing a minimum price for employment.

a True
b False

Suggested Answer

True as this is government’s effort at fixing a price for a service.

Note: Singapore has no minimum wage – as it allows market forces to take precedence. The rationale is that with a minimum wage legislation, a country becomes less attractive to foreign investors as it drives up their costs unnecessarily.


2. Which of the following are pricing objectives that AirAsia had to consider before launching their maiden flights?

I. Use of low price to gain sales and market share
II. Position the services as without frills, value for money
III. How it can discourage new players from entering the budget airline industry
IV. Frequency of flights used to stimulate and encourage demand
a I only
b I, II & III only
c I, II & IV only
d I, II, III & IV

Suggested Answer

All of the above options are valid as they will directly or indirectly impact on how AirAsia prices its services.


3. With the growing inflation of 10%, the price of public transportation has increased by 20% but demand has fallen by 30% especially for the use of cabs, as it is most expansive. What type of demand curve does this community have?

a A positively sloped and inelastic demand curve
b An positively sloped and elastic demand curve
c A negatively sloped and inelastic demand curve
d A negatively sloped and elastic demand curve

Suggested Answer

A negatively sloped and elastic demand curve. This is because when prices increase by 10% for a normal good (transportation), the demand has fallen by more than 30% for the taxi business as shown in the diagram below.





4 Which of the following are factors that will affect the pricing situation for RP to launch its new post graduate courses?

a Legal and ethical constraints like minimum pricing
b Consumer price sensitivity
c Cost of managing the courses
d All of the options

Suggested Answer

All of the options.


5 McDonalds’ advertising message “what you want is what you get” emphasizes on the concept of ______________.

a Low price
b Fair value
c Price sensitivity of its target market
d Marginal costing

Suggested Answer

Answer (b). The message emphasizes on Fair Value / Value for Money – its ability to cater to the needs of its target segments


6 Which of the following have been priced with non-price factors?

I. Stereo Equipment (eg Philips Hi-Fi)
II. Pain Relievers (eg Panadol)
III. Carbonated drink (eg Coke)
a I only
b I, II & III only
c I & II only
d I, II & III

Suggested Answer

All of the above options are non priced factors. Rationale is that buyers are willing to pay a premium price for these products due to their established brands and product performance and/or perceived value (ie coke represents a type of modern lifestyle).


7 Price reductions are not always beneficial to organisations like Apple’s iPod.

a True
b False


Suggested Answer

True. The risks for initiating a price cut is as follows:
a) Low Quality Trap (luxury brands) - The consumers will assume that quality is below that of higher price competitors like Samsung MP3.
b) Fragile market Share Trap – a low price buys market share, not market loyalty [ie NTUC vs Sheng Siong Supermarket]
c) Shallow Pockets Trap – higher price competitors may cut their prices and may have longer staying power as they have deeper cash reserves.

Optional explanation: Some firms (ie Eastman Kodak, Japan) stepped up its drive to win market share y selling at almost 50% below normal prices, but this involves high risks as indicated above.


8 Which of the following has a discriminatory price market?

I. Singtel Mobile
II. Singapore Power
III. Medical Care at Singapore General Hospital
a I only
b II & III only
c I & II only
d I, II & III

Suggested Answer

All the above have discriminatory pricing
a) Singtel Mobile (students, professionals)
b) Singapore Power – residential vs industrial
c) Medical care (Singapore residents vs foreigners charged different)