Marketing ManagementQuiz # 6 (Pricing)

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American AirwaysIn the course of researching the most appropriate price for its in-flight internet service, American Airways marketing research department has introduced the in-flight internet service on one of its flights from Chicago to Tokyo for 3 weeks. It charged $15 for one week, $20 for the next, and $25 for the third in its first class. American Airlines intends to price its in-flight internet at rate that achieves highest rate of return on investment to the company. American Airways found that among 95% of first-class passengers there was hardly a change in demand with the price change.

1. In order for American Airways to set the rate that achieves highest rate of return on investment it should determine:

a. The demand levels at different researched prices.b. The cost function of the in-flight internet servicec. The price elasticity of demandd. All of the above e. None of the above

2. The research results of American Airways research indicate that the demand is elastic.

a. Trueb. False

3. The research results of American Airways research suggests that American Airlines should:

a. Charge $15 for its in-flight internet service b. Charge $20 for its in-flight internet service c. Charge $25 for its in-flight internet service

4. Among the possible reasons the demand showed such behavior is:a. The cost of the service probably constitute a small

percentage of the passengers' income.b. First-class passengers think that the higher price is not

justified.c. Both (a) and (b)d. Neither (a) nor (b)

5. By charging $15 for its in-flight internet service American Airways way increase the sales volume of this service

a. Trueb. False