When Patricia Flagg's Friend Asked Her Create Something to Sell

When Patricia Flagg's friend asked her create something to sell at a holiday boutique food booth, she had no idea she was launching a new business. For her initial product she packaged eleven different kinds of beans, some herbs, and some spices with directions to add a ham hock, water, and vegetables for Minnesota Heartland soup. She has since added Illinois Prairie Corn chowder, which has dry corn, rice, and seasonings, as well as a Louisiana Red Bean gumbo mix and a New England fish soup mix. Each mix makes enough to feed 10 people. Her annual fixed costs are $9,000, and the variable costs for one bag of soup mix are $1.50. An individual bag of soup mix sells for $6.50. In her first year of operation, she sold 3,800 mixes.
-Flagg has not found any customers who think she has priced her mixes too high. Customers feel the product is worth the $6.50 price tag. In others words, her price is the:

A) point of price elasticity
B) cost-plus price
C) marginal price
D) point of price inelasticity
E) expected price

Correct Answer:

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