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Free response · 2.5 Price
Exam-style concept-application task: apply the topic to a new business scenario. Suggested time 12–13 minutes.
FRQ 3 — Concept application (3 points)
Summit Gear rents skis in a town with five other rental shops that all charge about $45 a day for similar equipment; its cost per rental day is $20. Summit Gear's owner, Dana, wants to add a premium package — expert boot fitting plus freshly tuned skis — that rivals do not offer, and is deciding between $55 and $70 a day. A survey of past customers found 48% would pay $55 for the package, and 15% would pay $70.
(A) Identify the pricing strategy Summit Gear uses for its standard $45 rental and explain why it has little pricing power there. 1 pt
(B) Explain why the premium package gives Summit Gear more pricing power than the standard rental. 1 pt
(C) Recommend $55 or $70 for the package and justify the choice using the survey data and the per-unit cost. 1 pt